What mutualism
means for Labour
Political economy and public services
Patrick Diamond | Tristram Hunt | Tessa Jowell |Anthony Painter
Michael Stephenson |Gregg McClymont | William Davies | Andrea Westall | Adam Lent
Contents
Foreword
A mutual moment
Tessa Jowell
5
Introduction
Mutualism and social democracy
Patrick Diamond
7
What mutualism means for Labour
Big society, big danger
Tristram Hunt
Editor: Michael McTernan
Published in 2011 by Policy Network
Copyright © 2011 Policy Network
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Design and layout: Alan Hunt, [email protected]
15
Co-operatism as a means to a bigger society
Anthony Painter
27
A real version of mutualism for the left
Michael Stephenson
37
Mutual principles may be more important for Labour than mutuals
Gregg McClymont
43
Bringing mutualism back into business
William Davies
49
Mutuality and economic relationships
Andrea Westall
57
Beyond mutualism and towards the ‘big economy’
Adam Lent
67
Research agenda: Moving forward with mutualism
Michael McTernan
71
www.policy-network.net
3
Foreword
Tessa Jowell
Mutual ideas have always been a part of Labour’s tradition but their contemporary
relevance become more obvious with each passing day. Mutualism gives expression
to the phrase that we can achieve more together than we can alone.
The definition of a co-operative is that it is an organisation owned by its members
and run for its members – the opposite of the powerful elites who have contributed
to the global economic crisis. It is the opposite too of some of the organisations the
Conservatives are passing off as mutuals in their pathfinder pilots which we find in
fact are majority owned by private equity companies.
Labour’s most pressing challenge, as outlined by Ed Miliband in his speech to Labour
Conference in 2011, is that of reshaping our economy to better suit the long-term
needs of people and their families rather than the short-term profit needs of the
few.
As these essays show, there are clear areas where mutualism could be relevant to
the private sector economy – in finance, energy, housing and more.
Indeed, it looks as if the co-operative sector is already forging its way ahead, in spite
of the recession, having grown by 21% from 2008-2010. It is clear that we cannot
go back to ‘business as usual’ and mutualism could form one strand of Labour’s
economic alternative.
But it is not only in the private economy where mutualism can help to influence
Labour’s narrative. Our public services, battered as they are by the Coalition’s cuts
and reorganisations, are in greater need of mutualist values than ever.
In government Labour made real strides by supporting new mutual models in public
services. We created more than 130 NHS Foundation Trusts with nearly two million
members and launched over 100 co-operative trust schools. We also understood
the need for the role of the state to create the conditions for mutuals to flourish by
reframing the regulatory regime governing them.
4
What mutualism means for Labour
Foreword
5
In opposition we must resist the temptation, as Michael Stephenson argues, of
lumping good arguments for continued mutualisation of public services in with the
Conservatives’ flawed ‘big society’ rhetoric. The very nature of what mutualism
provides – democratic engagement, collective endeavour, community control – is
ten times more powerful than the weak appeal to Burke’s ‘little platoons’.
Mutuals in public services could help to form a bulwark against the potential
privatisation of community assets, for example with Sure Start centres. They can
also help to build on the maxim ‘community where possible, government where
necessary, partnership always’, by locating services at the most appropriate level.
In the wake of the credit crunch, the public have made it very clear that they
are unwilling to put their trust in organisations that they feel are not run in their
interests and operate outside of their control.
So we must look anew at how services can build trust through building relationships.
The next stage of public service renewal must be to support carers to care, teachers
to teach and nurses to nurse. Mutuals, which provide a democratic structure for
users and staff to act together in the interests of the community are one way of
developing relationships and avoiding the sometimes over-reliance we had in
government on targets and managerial mechanisms to achieve improvements to
people’s lives.
This is such an important time to be thinking about the benefits mutualism can
bring in both the public and private spheres. The authors in this publication do great
justice to that challenge. It is up to all of us now to make the wider case for a mutual
moment in the Labour Party if we are to make this a reality.
Tessa Jowell is UK shadow cabinet minister for the Olympics and London and
Labour MP for Dulwich and West Norwood
Mutualism and social democracy
Patrick Diamond
The purpose of mutualism must be to combine an emphasis on collectivism and
social justice with pluralism and a more equal distribution of power
The role of the mutual sector in forging a strong economy and a more equal society
is fast becoming hotly contested territory in British party politics. In the wake of
the most severe global depression for more than eighty years and the search for
credible alternatives to neo-liberalism, politicians of all stripes have ostensibly vied
to champion and take ownership of the mutualist ideal. The values and institutions
of mutualism have the potential to act as a vehicle for a new politics of the public
interest after the crisis.
Nonetheless, the operating frameworks of mutualism have been left unclear, and the
means to achieve its goals often appear nebulous. On the one hand, mutualism may
refer to an alternative form of economic organisation, namely common ownership
of the means of production. In this instance, companies are owned as mutuals in
order to give employees a greater stake, ensuring that workers are able to share in
the fruits of profitability and growth. Employees are able to exercise greater voice in
the overall management and direction of the firm, improving job satisfaction. This
profit-sharing approach is commonly referred to in the British debate as the ‘John
Lewis model’ and has a long lineage.
On the other hand, there is ‘social mutualism’: this involves a particular approach
to the organisation and delivery of public services, where both employees and
those using public services can acquire greater control over their management and
operation. This form of mutualism involves alternative models to both the market
and the state, echoing the early 20th century emphasis on the importance of civil
society. State-provided services may often be supplemented, or indeed supplanted,
by local citizens’ and community organisations.
These frameworks have been further obfuscated by the UK coalition government’s
use of mutualism within the rubric of its ‘big society’ agenda. They contend that the
state in Britain has grown too large suffocating the ‘little platoons’, as Edmund Burke
described them, that give life to civil society. A crisis that originated in the financial
6
What mutualism means for Labour
Mutualism and social democracy
7
markets has been recast as a crisis of a bloated and over-extended state. The public
sector therefore needs to be reined in, and in the future will be demonstrably
smaller and leaner. The centre-right’s vision is of community-based organisations
and mutuals supplanting taxpayer-funded providers, at least in principle ensuring
provision for the most vulnerable.
skills, weakening the productive capacity and long-term growth potential of the
British economy. Indeed, there are many communities where ill-timed retrenchment
may cause serious harm to the most vulnerable, and weaken the life-chances of
children and young people in the most disadvantaged households. This echoes the
opposition to ill-timed retrenchment across the European Union.
Although interpreted as a veiled threat to the continuation of the universal postwar settlement, this agenda is a direct co-option of traditional social democratic
narratives, and a bold encroachment on Labour’s ideological terrain. It must not
be forgotten that mutualism has a rich history in the Labour movement and its
principles are in many ways anathema to Conservatives, not least the notion of
co-operative ownership of the means of production which represent a threat to
universal property rights. Not by coincidence, the new government have remained
conspicuously silent about the role of mutualism in the private sector economy.
The accusation among many on the left is that it is a convenient mask for engaging
in ideological ‘gunboat’ politics, concealing the true nature of the right’s agenda to
drastically cut back public provision.
Nonetheless, there is also the
need for a coherent strategy to
It is imperative that opposition
manage the process of change
to the cuts does not become an
underway. Indeed, there is a real
objection to the redistribution of
danger that social democracy will
power in British society
concede the mantle of mutualism
and community ownership to the
centre-right, through knee-jerk opposition to Cameron’s ‘big society’ agenda.
It is imperative that opposition to the cuts does not become an objection to the
redistribution of power in British society. If the left defines itself as defender of the
monolithic state, it will be forever associated with unresponsive and centralising
bureaucracy. Councils and local government, in particular, have to determine how
best to maintain effective services in a climate of austerity, accepting that rising
demands and tighter budgets require new delivery tools and new models of
provision. There is no alternative to innovation, namely doing more for less and
discarding the old rules of command and control.
The challenge for Labour is therefore to develop a clear vision of what mutualism
means for the left after the financial crisis, in an era of public spending austerity and
loss of confidence in Anglo-American business models. This grand narrative has to
acknowledge the trade-offs and dilemmas involved in developing mutualist models
of organisation both in public services, and across the wider economy after the crash.
Beyond public sector command and control
It is in the public sector where the potential for a rapid shift towards mutualist
models has been perceived to be greatest. This is partly driven by the need for
innovation in the light of financial austerity, alongside the recognition that a
vibrant public realm is at the core of a successful, prosperous society. The public
sector in the United Kingdom is undergoing the largest budgetary cuts since the
Second World War, while all over Europe governments are imposing harsh austerity
measures which may radically curtail the activities of the state. Public sector bodies
and local councils in Britain are determining how best to respond and adapt to
the next wave of change driven by the cuts imposed by the Conservative-Liberal
Democrat Coalition government.
8
In this regard, there are a range of emerging models in the United Kingdom that
have sought to capture the benefits of mutualisation, notably Lambeth Council’s
model of a ‘co-operative council’ in south London. A host of local experiments are
also underway including the ‘Scallywags’ parent-run nursery in Bethnal Green, the
‘Holy Cross Community Trust’ day-care service in Camden, and ‘Southwark Circle’
which helps older citizens and their families through social networks that enable
people to share their time, skills and expertise. They offer the potential for a real
transformation of services struggling with rising demands and shrinking budgets.
Yet, as well as celebrating and developing such experiments, policymakers must
also recognise that there are a number of caveats to the wholesale endorsement of
mutualism in the current climate.
Many on the British left argue that such rapid cuts are hasty and have the potential
to cause irreversible damage both to the public realm and to infrastructure and
First, as experience in the Netherlands and Nordic countries indicates, the cultivation
of self-organising institutions and networks that are capable of delivering high
What mutualism means for Labour
Mutualism and social democracy
9
quality public services requires decades of investment, as well as the appropriate
cultural values, norms and an appropriate level of social capital. In other words,
mutualist organisations will not be fostered and embedded within the course of a
single parliament, but will require decades of investment and support to flourish
in partnership with an ‘enabling state’. In order to generate alternative provision
through the civic sphere, it is necessary not for the state to get out of the way, but
to provide capacity and resources.
The second point is that mutualism in the public sector raises issues concerning
equity similar to those posed by localism: how can equal access and quality of
service be maintained nationally if there is much greater variation in how services
are delivered locally. Left politics has traditionally been predicated on universality
and uniformity, chiming with influential strands of opinion which express hostility
towards ‘postcode lotteries’ in public services. Nonetheless, the only means of
improving services in an age of austerity, enabling more citizens to experience and
achieve excellence, may be precisely to tolerate greater variance in outcomes. But
this remains heavily contested terrain for the left, at least in Britain and much of
Northern Europe.
10
control’, in a world where power is increasingly distributed at multiple tiers and
levels beyond national governments.
Mutualism and private sector economy
The final theme concerns the relevance of mutualism to the private sector economy.
As this essay has inferred, mutualism has been somewhat underplayed in relation
to private sector institutions, not least because it challenges powerful interests
and appears to contravene the established norms of neo-liberalism, which despite
the crisis remain deeply embedded in the global economic order. An agenda for
mutualism in the private sector economy might work at several levels:
The first is to ensure that if banks are deemed ‘too big to fail’ in the light of the recent
meltdown in the financial sector, mutuals are promoted as a viable alternative form
of financial organisation. A financial sector that contains vibrant mutual entities such
as building societies and community-based credit unions will be more balanced and
resilient. Mutually-owned banks and building societies might also help to restore
the ties between banking and the local community, injecting credit into poorer
areas while supporting the needs of expanding small and medium-sized businesses
through a Community Reinvestment Act.
The third issue relates to the politicisation of mutualism as an approach to
organisational reform in public services. While it is inevitable that mutualist ideas
will be subject to contestation on both left and right, given that mutualist models
strike at the heart of many fundamental questions about the role of the state in
a modern economy and society, they often require long-term investment beyond
the lifetime of any single parliament or government. The importance of integrating
mutualism into a long-term consensus incorporating the most basic institutions
and values ought not to be understated. For social democrats, it means reflecting
on how institutional forms can be entrenched within the fabric of society, rather
than swept away immediately in the wake of electoral defeat as may be the fate of
Labour’s social reforms in the United Kingdom.
A further means of promoting mutualism in the financial sector is to remove
regulatory obstacles and constraints that prevent the emergence of new
organisational forms. In the United Kingdom over the last decade, the Financial
Services Authority (FSA) was often unsympathetic to the creation of more mutuallyowned businesses. Government as a whole did little to streamline the legal and
regulatory structures necessary for setting up new mutual businesses, and too little
was done to capitalise organisations that would never be in a position to raise funds
on the financial markets. There have to be viable alternatives to profit-maximising
forms of shareholder capitalism in the United Kingdom economy.
So with realistic focus mutualism can be part of the answer to forging a new postcrisis conception of the state. Research carried out in May 2011 for Policy Network
showed that the majority of citizens in Europe had lost faith both in markets and
the state. They recoiled against the behaviour of financial markets and the banks in
the aftermath of the global crash, but they were also concerned about the state’s
capacity to uphold and defend the public interest. The left cannot adequately
respond to the crisis by simply reasserting the state’s capacity to ‘command and
Finally, mutualism entails a new model of the firm where the board and senior
managers do not exist merely to maximise the short-term profitability of the
company, but see their role as ‘custodians’ preserving the business for the good
of future generations. In that sense, a private company has to be understood as
upholding public interest principles, as embedded in a community to which it owes
duties and obligations. This is markedly different to the dominant orientation of
Anglo-American free market capitalism. Mutual ideals are not just about developing
mutually-owned businesses and organisations, but changing the culture of the
wider economy.
What mutualism means for Labour
Mutualism and social democracy
11
Mutual purpose
The potential of mutualism lies in its vision of an alternative conception of capitalist
economic relations. In advancing the politics of production, firms with an ethos of
responsibility and long-term value creation will act as a spur to productivity and
growth, the most likely source of comparative advantage for the West over the
next fifty years. In furthering the politics of distribution, mutually owned businesses
can help to ensure that more workers have a direct stake in the fruits of growth.
This is a necessity in a global economy where wage returns to middle and lower
income employees have declined dramatically over the last fifteen years across the
industrialised nations. After the crisis, the solution cannot be merely to resurrect
the old growth model which exposed the West to serious risk and instability. The left
should have the courage to frame a new economic agenda for the next decade.
organisation and structure of public services. Social democrats in Europe are the
heirs of a pluralist tradition encapsulated by Robert Owen, Charles Fourier, Thomas
Paine and Pierre-Joseph Proudhon which champions the diffusion of property
rights and economic control, spreading power as widely as possible. It has never
been more urgent than today.
Patrick Diamond is a senior research fellow at Policy Network and a
visiting fellow of Nuffield College, Oxford
In relation to public services, mutualisation is an important aspect of recasting
the state after the crisis. However, it needs to be supported by a simultaneous
drive to transform the relationship between service providers, users and the
wider community, reshaping the production process within public services. The
key is to develop an ethos of shared responsibility which encourages autonomy
and self-reliance wherever possible.
Increasingly, reform will have to
Social democrats in Europe are
involve working in partnership with
citizens and communities rather
the heirs of a pluralist tradition
than imposing change from the topencapsulated by Robert Owen,
down, cutting across the traditional
Charles Fourier, Thomas Paine and
paternalistic ethos of the bureaucratic
Pierre-Joseph Proudhon
left. Transferring ownership to nonstate community-based institutions is
desirable, but alone it is rarely sufficient. The objective ought to be a state in which
power is shared between citizens, service providers, and elected representatives,
supported by public service guarantees which entrench rights of equity and access.
While condemning the ferocity of the cuts, social democrats have to be at the
forefront of putting greater power in the hands of people.
The purpose of mutualism in advancing a new form of social democracy is to
combine an emphasis on collectivism and social justice with pluralism and a more
equal distribution of power. The left has to recognise that change can be instantiated
from the bottom-up through local innovation, experimentation and a culture
of ‘disciplined pluralism’, rather than merely top-down through the centralising
bureaucratic state. This is the case as much in the financial economy as in the
12
What mutualism means for Labour
Mutualism and social democracy
13
Big society, big danger
Tristram Hunt
Labour is the historic heir to the tradition of co-operatives and mutuals. They can
play a key role in creating a genuinely transformative political project
Britain’s coalition government is predicated on a remarkable exercise in political
positioning; planting its blue flags onto hitherto uncharted areas of policy terrain.
The most audacious Cameroonian land grab is, of course, the much derided ‘big
society’. Its central idea, of an active, engaged citizenry empowered by the state
not dependent upon it, is something that the Labour party should instinctively
understand as part of its own DNA. It speaks to a vision of our party that is based
upon solidarity, reciprocity, cooperation and community empowerment. This is not
something the Labour party can, or should, oppose.
However, the old adage is that ‘actions speak louder than words’; no amount
of lofty rhetoric or posturing can obfuscate from the reality of the eye-watering
cuts that voluntary groups and civil society organisations currently face. The
New Philanthropy Capital estimates that up to £5.1bn could be taken out of the
voluntary and charity sectors. Against this backdrop, it is inevitable that people see
the ‘big society’ as nothing but a cynical device designed to distract from the swing
of Osborne’s axe.
And in the hope of saving the idea in which he has invested so much of his personal
political capital, the prime minister has continually sought to widen the goalposts.
The ‘big society’ is getting bigger; every new policy launch is instantly garnered
with mutualism, localism and other ‘big society’ buzzwords. But this muddying
of the waters is equally perilous for the centre-left and in particular for our cooperative and mutual tradition. Locked in the ‘big society’s’ toxic embrace there is
the very real danger that it is the Government’s vision of community empowerment
and their pitifully small version of mutualism that becomes lodged in the public’s
consciousness. In recent YouGov data, only 29% of people identified Labour
as articulating the kind of society they want to live in, just 1 point ahead of the
Conservatives on 28%. Labour needs to stop reacting to the government’s agenda
and spell out its alternative to the ‘big society’.
14
What mutualism means for Labour
Big society, big danger
15
Our tradition of co-operatives and mutuals offers Labour the perfect position from
which to articulate a reinvigorated vision of public services based upon a conception
of a responsive state that empowers citizens to become authors and designers
of their own services, not just deliverers or passive users. It also offers Labour a
vehicle for encouraging economic reform and redistributing economic power,
particularly in the financial sector. But before we can embark on those projects we
need to rediscover and reconnect with our own heritage as a broad, associationalist
movement of grassroots activists. We need to authoritatively restate our values of
co-operation, solidarity and mutualism in order to expose the difference between
our vision of society and our opponents’. The difference between an authentic
tradition, built upon the secure foundations of a century’s worth of history, and a
‘tradition’ built upon an overlap in one of Downing Street strategist Steve Hilton’s
Venn diagrams.
Rediscovering our past
The Labour movement has in its beginnings a rich associationalist tradition, the
coming together of a heady mix of local co-ops, trade union branches, free voluntary
associations, socialist societies and the transforming zeal of non-conformist religion.
When he founded the Independent Labour Party in 1893, Keir Hardie deliberately
insisted upon affiliation membership, branch autonomy and a weak central
executive as being the basis for the fledgling party’s organisation in order to bring
these disparate groups together under a broader banner of social justice, equality
and fair labour rights.
We can trace these roots back most obviously to the ‘utopian socialism’ of Robert
Owen, and his attempt to craft an alternative, ‘co-operative’ philosophy during
the early 19th century. Owen’s starting point was that conditioning, not character,
was the key to man, who ‘is a compound being, whose character is formed of his
constitution, or organisation at birth, and of the effects of external circumstances
upon it, from birth to death.’ Original sin was a fallacy and what was instead
required was an educational and social ethos designed to draw out the co-operative
best in mankind. At his New Lanark factory, he operated a beneficent commercial
dictatorship cutting working hours, eliminating underage employment, restricting
alcohol sales, improving conditions and introducing free primary education. In A
New View of Society, or Essays on the Principle of the Formation of the Human
Character (1813-14), Owen detailed how his experiment could be magnified for
society at large and, in so doing, helped to drive through the 1819 Factory Act
limiting working hours in the textile industry.
16
What mutualism means for Labour
Owen’s solution was to establish a series of communes, which entailed a retreat from
‘the old immoral world.’ More productive was his following of Owenite socialists,
with their criticisms of modern competition, who grouped together under the
aegis of the British Association for the Promotion of Co-operative Knowledge. ‘The
selfish feeling in man may fairly be called the competitive principle,’ announced the
leading Owenite William Lovett, ‘since it causes him to compete with others, for
the gratification of his wants and propensities. Whereas the co-operative may be
said to be the social feeling that prompts him to acts of benevolence and brotherly
affection.’ An economy based on the competitive system was condemned as
inherently inequitable and unstable: wealth was concentrated, trade cycles became
more extreme, and poverty deepened. While Robert Owen himself increasingly
focused his efforts on reforming
religion and ending ‘the unnatural
and artificial union of the sexes’ in
The co-operative societies provided
marriage, the Owenites during the
more than just financial assistance.
1830s built a political programme
They also acted as a repository for
around co-operation and a moral
social capital
sense of value based on labour-time
and just transfer rather than ‘the
doctrine of wages.’ This led to the establishment of a series of co-operative shops
in London and Brighton, ‘labour exchanges’ for the direct marketing of goods, trade
unions to advance the cause of labour.
From this tradition emerged the better known Rochdale Society of Equitable
Pioneers, with a clear focus on retailing unadulterated foodstuffs at competitive
prices. At their peak, co-operatives played an indisputably central role in working
class life. The historian Peter Gurney described the co-operative store as the
‘defining feature of working-class community and neighbourhood life.’ They were
a way of providing services for the benefit of one another, based on values of
reciprocity and mutual assistance rather than a desire to maximise profits. These
ideas were crystallised in the idea of the ‘divvy’, the dividend paid out to the cooperative member. The dividend became part of the rhythm of people’s lives, the
little bit of money that kept the wolf from the door, or the means for working class
families to build a small reserve of savings.
But the co-operative societies provided more than just financial assistance.
They also acted as a repository for social capital, organising events that fostered
community cohesion. In 1950 the Buckingham Co-op Societies dairy department
were able to attract more than 3,000 people to their annual sports day. As one
Big society, big danger
17
co-op member wrote in 1958 “all our wants, or at least all our needs, could be
supplied… Yes, all of us – men, women and children alike – were well looked after by
the old Co-op. It could feed, clothe, shelter and in the end, bury us.” Even in his last
journey, the true co-operative member brought a ‘divvy’ as a final payment to those
left behind. This vision, of a self-sustaining community bound by relational ties of
common endeavour is authentically Labour. Written on our membership cards is
a proud proclamation of this vision. The history of the co-operative movement is
intertwined and inseparable from the history of our own Labour movement.
In 1927 this bond was formalised when the two political wings signed an electoral
pact. This alliance continues to endure, with twenty eight Labour MP’s also
affiliated to the Co-operative party, including the Shadow Chancellor. In 2010 the
Labour manifesto included 24 suggestions from the Co-operative party, including
turning Sure Start into a network of locally accountable mutuals, mutualising British
Waterways and Northern Rock, and encouraging more co-operative schools and
housing associations.
By contrast, Conservative policy towards co-operatives has traditionally been at
best indifference, at worst outright hostility. From Neville Chamberlain’s tax raid
on ‘the divvy’, to Margaret Thatcher’s demutualising of building societies, to the
Tory-led Government’s immediate axing of the fund Labour had made available for
schools to turn themselves into co-operatives, the Tories have never understood
the role co-operatives and mutuals can play in creating more resilient communities.
Three years ago, to much media fanfare, David Cameron launched the Conservative
‘Co-operative’ Movement. For its first 18 months, it existed without any mechanism
for people to join, its chairs were appointed from the centre not the community,
and it failed to found a single co-operative in either the public or private sectors,
other than itself. More worrying, has been their actions in government. Chris Huhne
is withdrawing support for solar renewable energy co-operatives, forcing many
to close down. Michael Gove has taken the funding away from the co-operative
schools project. Francis Maude has shelved plans for more co-operative Sure Starts
and housing trusts. Labour’s 2010 manifesto promised, on the prompting of the
Co-operative party, to mutualise British Waterways, the quango that runs Britain’s
canals, giving real power to consumers. The government instead plans to turn
British Waterways into a charitable trust – a less accountable quango. Co-operative
values are deeply embedded in the Labour party’s DNA; for David Cameron, they
are only skin deep.
18
Pathfinders without a path
The Government’s interest in mutual models is, unsurprisingly, restricted to their potential
to improve public service delivery through employee led co-operatives and mutuals.
There is a wide body of research to suggest that spinning out into mutual models
empowers staff, freeing them to be more focused and responsive to the needs of
local citizens.1 Increased power begets increased engagement and, so the argument
goes, this leads to greater efficiency. The recent success of the co-operative economy
would seem to reinforce this argument: between 2007 and 2009, a period when the
overall turnover growth of the whole British economy contracted by 1.8%, the Cooperative economy’s turnover grew a staggering 24.6%.2
This is an important argument to
We must not allow our opponents
make: people use services because
to tar us with one of their favourite
they are efficient and effective, not
brushes, that we are the party of a
just because of their values. And
conservative public sector with its
whilst we should never let public
services be judged by the same
face set against innovation
criteria as ‘normal’ businesses, Labour
cannot abscond from the efficiency
argument entirely. Not only because of the very real demographic pressures facing
our public services, but also because we must not allow our opponents to tar us
with one of their favourite brushes, that we are the party of a conservative public
sector with its face set against innovation. Indeed, we should welcome the fact that
the government has rejected this lazy characterisation of inefficient public sector
workers and is instead looking at ways to harness their creativity, energy and desire
to make a difference.
Furthermore, the list of the Government’s Pathfinder Programme mentors
includes, amongst the usual array of management consultants, some of the recent
mutual success stories. Organisations such as Greenwich Leisure Limited, a social
enterprise that mutualised in 1993 (following a 30% cut in local authority funding)
and now employees over 3,000 staff, turning over £45m; and Sunderland Home
Care Associates, a co-operative that delivers over 7000 hours of social care to the
North-East’s elderly and boasts a 5% staff turn-over rate (a full 15% lower than
the national average for care workers) will be amongst those providing support.
However, whether this means the government will prioritise the advice of those at
1 For a good example, see John Craig, Matthew Home and Dennis Morgan, The Engagement Ethic
(London: Innovation Unit, 2009).
2 The UK Co-operative Economy 2010: A review of co-operative enterprise. Manchester. Co-operatives
UK. 2010. p18.
What mutualism means for Labour
Big society, big danger
19
the co-operative coalface over that given by PWC and KMPG remains to be seen.
But any support we do offer must come with caveats. For whilst the benefits of
mutualising are real, the challenges are equally manifest. One such challenge is TUPE
(Transfer of undertakings, protection of employment) legislation, which guarantees
the terms and conditions of employees who undergo organisational change.
This legislation is vital in protecting staff’s rights during private sector buyouts.
But maintaining the working conditions – pensions, sick pay, holiday allowances
etc. – enjoyed by statutory bodies is difficult to impossible for organisations of
the Burkean ‘small platoons’ variety. One can predict Conservative scorn at this
kind of regulation and the inevitable union interest in any plans to circumvent it,
but in a climate of public sector pay-freezes and 4% levels of inflation, the task
of persuading employees to forgo their conditions and enter into protracted and
potentially insecure processes, becomes a far harder sell.
Spinning-out also requires a markedly different set of business capabilities to those
traditionally practised in the public sector, where budgets are spent and work
guaranteed. Developing a flexible business plan, acquiring capital, maintaining
cashflow, budgeting for contingency and the culture shock of competing for tenders,
commissions and work, all present new challenges for the would-be mutual. The
kind of capability building needed to prepare staff for this requires a significant
investment of time. And as with
any new business, it also requires
Without asset locks small,
significant access to capital. Perhaps
profitable mutuals will prove easy
most significantly, there has been
prey to private sector players
little discussion of how to manage the
risk of public service spin-outs failing.
The perennial question – what should the government do in the event of the
collapse of a mutual or private sector provider of vital public services – was given an
emphatic concrete expression following the Southern Cross debacle. This question
goes to the very heart of the issue and urgently requires an answer. Can the
government really shrug their shoulders and say the market decides if for example,
the elderly and most vulnerable lose their access to care? None of these challenges
are insurmountable, but the wall of silence from the Cabinet Office is disconcerting.
20
members of the mutual taking their shares to market. This might sound like a
tedious, technocratic position upon which to build a policy platform, but without
asset locks small, profitable mutuals will prove easy prey to private sector players.
Communities risk losing their stake in local services.
Lacking the bedrock of our tradition and without a demonstrable grasp of the
fundamental challenges, we are right to question the motives of the Tory-led
government’s brand of mutualism. In opposition it is our duty to scrutinise
government activity and we need answers to these vitally important questions of
implementation. But we also owe it to our history. We cannot stand still and watch
should ‘mutualisation’ be used as cover for a programme of coalition sponsored
carpet-bagging.
Powerful citizens: The authors of mutual public services
But if our support must be qualified, so too must our opposition. The political trap
is clear: oppose too vociferously and Labour will be portrayed as rejecting public
service innovation, or worse, as enemies of the very mutual values we seek to
protect.
It is true that in Government we were slow to acknowledge that our unprecedented
levels of public service investment were not always matched by commensurate
improvements in quality. We invested, but we didn’t empower. Research by Ipsos
Mori in 2009 showed that only 20% of people felt they had an influence over
how public services are delivered. In his speech to the Fabian Society last year, Ed
Milliband told the audience “we sometimes lost sight of people as individuals and
of the importance of communities”, concluding that over time, this is why “people
railed against the target culture, the managerialism of public service reform and
overbearing government.” By the time we began to question both the dogma of
our New Public Management theory and explore different conceptions of the
relationship between citizen and state, placing ‘citizen empowerment’ at the heart
of the Cabinet Office’s (under Ed Miliband’s watch) public service reform paper
Fairness and Excellence in 2008, it was too late.
For some, this silence is more foreboding; unless we have clear guarantees from
the government that mutual spin-outs will be complied to incorporate into legal
forms equipped with asset locks. Asset locks are the legal bind that prevents
Mutualism provides an opportunity for Labour to reinvigorate its approach to
public services. There is no better way of responding to the public’s feeling of
disconnection from their services than by giving them a real voice in deciding how
those services should be run; a democratic stake is at the very heart of all mutual
models. But we should explore ways in which we can take the agenda further. We
should empower citizens and communities to become the authors and designers of
What mutualism means for Labour
Big society, big danger
21
their own services. This distinguishes us from the Government, who restrict their
vision of mutual empowerment to public sector staff and see in citizens merely
a volunteering resource to be exploited. Our mutual models should harness the
creativity and insight of citizens as well as staff.
Community owned co-operatives and mutuals could do this through a ‘right to
request’, similar to the policy Labour introduced for PCT staff in 2008. Indeed, it
was Labour who introduced the asset-locked Community Interest Company legal
form, which allowed a community to be defined as the primary stakeholder and
beneficiary of an organisation’s assets for the first time, a model which has been
adopted by thriving community mutuals such as Millmead Children’s Centre in
Kent. In our 2010 election manifesto we proposed measures such as allowing social
housing tenants to run their own estates and firmed up the requirement to have
community involvement in local service delivery plans.
Buried deep within the Localism Bill, the Government do offer a vague commitment
to a ‘right to challenge’ for certain types of civil society organisation. But this has
not been explicitly joined up with the mutualism agenda. And, despite all this, the
Government is actually rolling back our early advances in this area. The right to
request has been cancelled as part of the top-down reorganisation of the NHS that
David Cameron promised would not happen. Over in the Eden Valley ‘big society’
pilot area, residents are taking over their local pub. But last August the government
axed £3.3m worth of funding the Labour government had put aside to support
community owned pubs to be set up across the whole country, alongside cancelling
the £1m we had pledged towards the ‘Pub in the Hub’ scheme. Even our most
seemingly ‘big society’ schemes are threatened by funding cuts.
And ultimately this is the point, that building a co-operative society – expanding
mutuals and developing a truly functioning big society – cannot be a cut-price
option, a vehicle for a series of spending cuts. To build up the social capital and
community networks needed to deliver economic and societal change on this scale
takes time and, as least initially, investment.
But a radical new approach to the state is only half the story. The Labour party in
power were not just too hands on with the state, we were also too hands off with
the market. And once more it is through mutualism that we can be radical, injecting
a much-needed dose of democratic control into the financial services industry
whilst distributing economic power throughout the economy.
22
What mutualism means for Labour
Mutualising the financial ecosystem
There can be no doubt that the banking crisis gave the mutualism movement fresh
impetus. In the wake of such an unprecedented crisis it was perhaps inevitable
that something which can allow people to exert democratic control over previously
unaccountable financial institutions would be bumped up the policy agenda. Labour
knows that it did not do enough to rein in the actions of the banks during our
time in office. But our previous caution should encourage boldness now. We should
not be too timid to move our mutualism agenda into the financial sector. Not only
can this help to shake up the existing distributions of power within the sector, and
the economy more broadly, but it
should also create a more stable
Britain’s
financial
services
and secure financial sector.
industry is among the least
diverse in the world, a situation
exacerbated by the Thatcherite
policy of aggressively encouraging
building societies and credit
unions to demutualise
A variety of commentators from
across the centre-left have long
argued that the financial system
should be as diverse as possible
and last year, borrowing an old Will
Hutton metaphor, The Economist
wrote that ‘just as an ecosystem
benefits from diversity, so the world
is better off with a multitude of corporate forms’. These commentators are right.
Labour must seriously consider proposals that promote the growth of a financial
sector more grounded in our values. Britain’s financial services industry is among
the least diverse in the world, a situation exacerbated by the Thatcherite policy of
aggressively encouraging building societies and credit unions to demutualise. A new
generation of financial co-operatives and mutuals can play a vital role in redressing
this balance; a diversity of institutions will help to maintain a stable whole.
However, this task is not easy. Financial mutuals can have more difficulty in securing
capital and the impact of sharing the proceeds of growth can also sometimes lead
to slower capital accumulation. These disadvantages make it unlikely that, left to
its own devices, the market will provide this new generation of financial mutuals.
Vacating the space, as the government is doing, will not work. Providing incentives
for other banks to capitalise fledgling mutuals, providing community investment
tax relief for people who use them, and the Employee Ownership Association’s
proposal for expanding the existing Share Incentive Plan so that it benefits all
members of a firm and is not merely a way of enhancing executive salaries, are all
Big society, big danger
23
ways that Labour could provide the right structural framework to allow mutuals
to flourish. One proposal that Labour should definitely commit to is my colleague
Chuka Umunna’s campaign to remutualise Northern Rock.
However, we must be careful when developing a mutualism agenda for the
financial sector not to present mutualism as a panacea for the sector’s problems.
A thorough critical interpretation of the financial crisis is required in order to learn
the appropriate lessons; to blithely suggest that mutuals are inherently unrisky or
that their employees were immune to indulging in the practices that caused the
crash, would be wrong. Indeed, while the Co-operative and Nationwide emerged
from the recession in positions of relative strength, it was only the buy-outs of the
latter that saved the Cheshire and Derbyshire building societies in 2008, and the
Dunfermline in 2009, from going to the wall. Rather than prohibit risky investment
for these smaller firms, their mutuality may actually have encouraged it. Denied
the easier access to capital enjoyed by non-mutuals, they were forced higher up
the ‘risk curve’ and thus proved more exposed to the riskier tranches of subprime
mortgages and credit default derivatives. The fate of the Cheshire, the Derbyshire
and the Dunfermline highlights two key insights that must inform the type of new
mutual we seek to encourage.
First, that financial mutuals are businesses: they must compete. Any new mutual
that attempts to detach itself from the rest of the financial sector is unlikely to
acquire enough business to survive. And, second, that governance structure alone
guarantees neither success nor sensible sustainable investments. It is people, not
structure, that really determines the behaviour of any organisation; unless the new
mutuals’ members, employees and shareholders desire the right type of investment
then the benefits of mutualising the financial ecosystem will be unrealised. The new
mutuals we encourage must embrace the ethos and values that underpinned the
nineteenth- and early twentieth-century co-operatives. They need to once more
play an active, democratic role in their members’ lives. At the very least this should
include optional education and training programmes to improve their members’
financial literacy.
Intrusion into the private sector will be politically difficult. We should not delude
ourselves into thinking that public anger at bankers’ bonuses will automatically
neutralise those ‘overreaching state’ arguments. The Vickers report has largely
focused on the internal structure of Britain’s biggest, diversified banks. But part of its
scope is to explore ways of ‘reducing systemic risk in the banking sector’. We await
the Government’s full response to that document, but it remains amazing that the
24
What mutualism means for Labour
only serious reforms to emerge from the financial crisis are of public services. By
carefully promoting financial mutuals, Labour can tread this political tightrope and
help to create a more equitable, stable and democratically accountable financial
sector.
A mutual society
Our immediate role in opposition is to hold the Government to account, to scrutinise
and to stand up for the most disadvantaged of those targeted by the Government’s
spending cuts. But the journey from opposition to realistic alternative is one that
can be long and arduous. Elections are won and lost on a combination of economic
credibility and the ability to offer a compelling vision of a future society. They are
not about the past, or about exposing your opponents’ flaws. It is not enough for us
to merely criticise the ‘big society’ for its emptiness or for its rhetorical hypocrisy,
we must offer our own story of what society would look like under a Labour
government.
Mutuals and co-operatives must become an integral component of this story, as
integral as they were at the foundations of our party. One of the fundamental
questions that the Labour movement must now ask itself is how to create a
genuinely transformative political project in an era that precludes large-scale
statist intervention? With their capacity to reinvigorate public services, to recast
the relationship between citizen and state, and to promote a more stable and
democratically accountable financial sector, co-operatives and mutuals can play
an important role in contributing towards our answer. But more than this, they
also communicate our values of solidarity, cooperation, reciprocity, and community
empowerment in ways that the public can understand. That society works best
when people work together and share in each other’s fate. That when people are
trusted to help deliver a better society, they will respond responsibly and effectively.
And that the route to a better society, to real empowerment, is to give people a
truly democratic stake in that society.
It is only by offering our own, comprehensive vision of a society that we can truly
expose the inadequacy of the ‘big society’, rescue mutualism from its uncomfortable
clutches and reclaim our authentic tradition of co-operatives and mutuals.
Tristram Hunt is Labour MP for Stoke-on-Trent Central
Big society, big danger
25
Co-operatism as a means to a bigger society
Anthony Painter
It is essential that social democrats find new forms of ‘beyond state’ action to
move beyond the current ideological and political impasse
This type of essay generally starts with a dramatic expression of triple or quadruple
crises: economic, political, environmental and, from time to time, social. They
generally conclude with a solution to these crises which is essentially a modified
version of social democracy.
This essay will not propose such solutions and, in fact, its analysis is premised on
a scepticism that modern social democracy as it stands provides all the political
answers - at least without a major rethink of what it may mean in our current
political, economic and social context.
Social democracy had its origins in social movements surrounding industrial labour,
social religion, and collective political action. Increasingly, it has come to mean
relying on state power to counteract the insecurity of the market economy. That
is essential. But it is not enough; it is often counter-productive; it is confronting
antithetical economic facts of life; and it faces increasing questions of political
legitimacy.
New forms of ‘beyond state’ action - in both the market place and the public realm
- will be necessary to confront the serious collective action challenges that we face
as societies. In both the economic and political realms cooperatism provides a route
forward: it expands the institutions of civil society, creating more innovative, equal,
and involved societies in the process.
While challenging the directional flow of modern social democracy it is essential
nonetheless to pose a number of elementally social democratic questions. How
can freedom be preserved in a complex society? As Lionel Jospin might put it, how
can we enjoy the fruits of a market economy without succumbing to the perils of
a market society? In other words, we have to return to the challenge laid down
for us by Karl Polanyi. How do we embed the economy - most particularly labour
relations, land, and access to credit - in society and democracy?
26
What mutualism means for Labour
Co-operatism as a means to a bigger society
27
The simple fact is that neo-liberal capitalism as has dominated economic thought
and organisation for almost four decades has failed to meet the legitimate
aspirations of the majority. This has been experienced in the form of a Minskyesque financial calamity following the search for ever greater, riskier and ultimately
unsustainable returns. It has also been experienced at the level of the firm.
Short-term financial imperatives have eaten away at the value set of the modern
enterprise. This has both undermined its social embeddedness and, paradoxically,
the business sustainability. The financially driven supply push of products and of
the firm’s employees has resulted in inequality, short-termism, and a destruction of
value. It is little wonder that, within the business world itself as well as those who
comment on business from a free market perspective, there are many voices who
are questioning the short-term share-holder value model of capitalism.
It is not enough to graft a redistributive state onto a catastrophically unequal and
unstable global market economy, as social democratic parties have universally
attempted. Nor is it enough to endlessly pursue an unsustainable economic and
business model as market players have sought to perpetuate. A dense institutional
core of co-operatively owned and run businesses, financial services, public services,
energy providers, and community institutions shift the individual from a (heavily
indebted) consumer, worker and recipient to a provider, owner, and partner. And
it also provides a long-term focused, value-creating, socially (and environmentally)
embedded form of economic activity. Co-operatism re-embeds the market in
ethical, social and democratic relations. It presents a way out of the morass that
neither traditional social democracy nor neo-liberalism are able to offer.
A leaden-footed left
The struggles of social democracy in the developed economies of Germany, the
Netherlands, Sweden, the UK and across Europe are pronounced. The triumph of
social democracy in the aftermath of near existential breakdown in World War II was
premised on a covenant. Solidarity in the face of economic calamity and extreme
physical threat tilted the balance in favour of collectivism. Mass industrialism,
strong collectivist social and political movements, the palpable failures of liberalism,
fascism, and the destruction of individuality, adaptability, and liberty intrinsic to
communism provided an historic opportunity.
28
mutual regard. The class experience has splintered and no other predominant social
category has emerged. In a sense this was always the likely consequence of more
wealthy, less war-prone societies as the likes of Ronald Inglehart have established.
A cultural shift away from collectivism began with the coming of age of the babyboomer generation in the 1960s. Some see this generation as intrinsically selfish.
This is a harsh judgement. Free of war and with a bit of spare cash in their wallet
they were able to explore their individuality. They did so with both very positive
and some very negative effects. It’s not at all clear that this decline of collectivism
can be reversed. It is a cultural shift akin to the movement from an agricultural to
an industrial society.
The global financial crisis led to a
hasty rediscovery of the economist
John Maynard Keynes. Though
Our societies are more divided
armed with the right response to
than at any time since 1945.
financial and looming economic
Mutual suspicion has replaced
crisis, the left was blindsided
mutual regard
politically. The politics of collapse
quickly morphed into the politics of
deficit. Neo-liberalism was supposed to have collapsed as an economic creed in
2008-09. The ‘Washington Consensus’ was dead. Keynesian economics rode again
but only briefly, as the right was able to mine collective insecurity with the drill of
commonsensical politics.
The solidarity that underpins a social democratic renewal has not been sustained;
hence the political difficulties that social democracy faces. Once again western
societies face a polarised and inconclusive political environment. And the politics
of depression avoidance have been replaced by the politics of deficit reduction.
Social democracy, in the short-term at least, has failed to find a political answer to
this shift.
Despite expectations to the contrary, the global financial crisis has not provided a
similarly propitious context. In fact, the covenant has weakened and our societies
are more divided than at any time since 1945. Mutual suspicion has replaced
The right was fleet of foot after what had seemed like a complete intellectual
and political defeat. In some places, as in France, they have moved onto the left’s
territory in combination with identity populism. In the US, the right has returned to
the safe ground of anti-statist populism with considerable success and now appear
to be making the running following the debt-ceiling stand-off between the Obama
White House and Congress. The outcome of the 2012 presidential election is far
from clear.
What mutualism means for Labour
Co-operatism as a means to a bigger society
29
Prolonged stagnation may switch the intellectual initiative once again. For now,
the austerity view still prevails though with significant push back from the IMF –
currently resisted by the governments of the EU and the European Central Bank.
This is not just a contingent feature of the environment, however. It also reflects
the splintered nature of social forces that lend themselves to political collectivism
mixed with the difficulty of selling a prolonged Keynesian message to both financial
and political audiences as deficits endure.
In the case of the UK and Sweden, that anti-state view can be more subtle, with
fraternity, society and civic action positioned as a way of empowering the individual
and freeing them from the intrusive and burdensome state. Red Toryism and welfare
reform in the UK and citizen-established public services in Sweden – now copied
in the coalition’s Free School model – constitute a more intellectually imaginative
challenge to the social democratic
state. The left has to be careful not
Red Toryism and welfare reform
to fall into the trap of thinking that
in the UK and citizen-established
because this civic conservatism
public services in Sweden constitute
doesn’t provide all the answers,
a more intellectually imaginative
it provides none of them. In fact,
challenge to the social democratic
there is much that can be mined,
state
re-crafted, and projected in a more
egalitarian direction.
The left has been leaden-footed and, in many ways, complacent. It expected to be
the ideological and political beneficiary of global economic liberalism’s calamities.
Initially, this was the case. The end of 2008 was a good time to be on the left, with
Barack Obama gaining from an advantageously timed presidential election. Since
then, it has become apparent that the left’s instinctive reliance on the state as a
counter-weight to market excess created downstream political challenges in the
form of a popular reaction to ballooning fiscal deficits. It was ill-prepared for this
anxiety.
It would be easy for the left to once again wait for the pendulum to swing back
and, without doubt, in these uncertain times - with programmes of brutal fiscal
consolidation in process - that would be a tempting strategy. But this would be
a mistake for two reasons. Firstly, pendulum swings are notoriously erratic and
unpredictable. Secondly, the left still rests too heavily on statist solutions to the
problems presented by the uncertainty of growth; environmental degradation;
widening inequality with its impact on social well-being and a balanced economy;
30
What mutualism means for Labour
and the provision of collective goods. When it relies heavily on the state, the left
very quickly reaches its political limits long before it has found real solutions to
these deep issues. It is politically bounded.
The challenge for the left is to find a way of expanding society to counterbalance
both the market and the state. That is where cooperatism comes in. It is a way
of building social institutions that empower the individual against potentially
overweening market forces and a too often unresponsive state.
Embedding cooperatism
A key difference between the right and the left’s approach to cooperatism is that
the right pins its hopes on these institutions spontaneously emerging as the state
withdraws; conversely, the left sees the state as an essential partner in creating
the space for cooperatism to emerge. This gives the left an advantage, as the
state-underwritten approach has more chance of actually happening. The left’s
cooperatism has a better chance of becoming - in Polanyi’s terms - embedded.
So the question then becomes one of how. If this is not going to be a spontaneous
process with the odd state ‘nudge’ here and there as, for example, David Cameron’s
‘big society’ rhetoric presupposes, then what is the mechanism? The inescapable
conclusion is that the areas of greatest scope for expansion of social organisation
into the state and the market are those where the state already has ownership,
responsibility and control. They are considerable. The state is key to limiting itself paradoxical though this may be - as well as limiting the market.
An obvious place to start is with the financial institutions that are now owned by
the state. Building societies - of which Northern Rock was formerly an example were the quintessential co-operative institutions. They were the financial lynchpin
of local communities and were local institutions providing savings, loans, and
mortgages. They eschewed high risk in favour of stability and that is why they have
been able to largely weather the financial storm. Returning Northern Rock to a
member owned institutional structure would mean the government sacrificing a
financial bonus in the short-term in favour of less risk of future collapse, as Cormac
Hollingsworth has argued.
Given the deficit it will be tempting to cash in on Northern Rock’s assets. However,
just spinning the wheel again doesn’t make sound fiscal sense ultimately as the
state is the lender of last resort. The government should accept the lower return in
Co-operatism as a means to a bigger society
31
favour of more stability – in fact, that would send an important message about its
determination to have a more stable, longer-term financial system.
Co-operatives are not highly-leveraged business. However, they do require a degree
of capitalisation. Beyond the re-mutualisation of Northern Rock, there needs to be
support to enable the future growth of the co-operative sector. It is worth pausing
to note that co-operatives are a high growth sector. Co-operatives UK reports
that the sector has grown by 21% in three years from 2008-2010 in which the UK
economy has largely been in recession. A sound growth strategy channels capital
towards its high growth sectors. We need to invest in success and the co-operative
economy is one of our national success stories.
State-owned financial institutions are obvious sources of capitalisation for local
co-operatively owned financial providers, whether credit unions, local authority
banks, or building societies. The government should investigate how to make this a
reality. It could be part of the mission of a state investment bank underwritten by
HM Treasury. Combined with a Community Reinvestment Act whereby other banks
are surcharged when they fail to lend in deprived communities, this could begin
the process of re-capitalising local economies. A portion of this investment could
be channeled towards co-operative enterprises and institutions and the surcharge
for failure to meet targets could further be directed towards expanding local cooperative institutions.
State-owned financial institutions
are obvious sources of capitalisation
for local cooperatively owned
financial providers
In turn, these local financial
institutions may, in their business
lending, favour companies which
have been established on an
employee partnership model. Public
commissioning –local and national –
could also contain a co-operative preference. This further underlines the fact that
state action is required to enable the co-operative sector to flourish. The state is an
essential player if the co-operative sector is to be expanded.
However, like all state-sponsored investment it is important to invest strategically.
The types of co-operative which would attract such investment would be those
with a proven track record of success with an opportunity to grow with targeted
investment. If they are not sustainable then there is no argument for the state to
invest in them as a business as well as social proposition.
32
What mutualism means for Labour
There are some socially (as opposed to purely economically) worthy forms of
support and it is on an explicitly social basis that such support should be extended;
there is a clear distinction and it should be made. Take the DWP Growth Fund which
subsidised low cost loans through credit unions for the least-advantaged: in just over
four years credit unions who were members of the fund increased their lending by
81% in London. This means that their needs are met in a more sustainable way and
they are kept away from the clutches of loan sharks, interfacing more constructively
with credit unions who have the borrower’s interest at heart rather than that of
corporate or individual profit.
As markets are increasingly injected into the public sector, there is an opportunity
also for preferring providers which are incorporated on a partnership model. For
example, the education social enterprise ‘Green Dot’ was able to take over failing
schools in the Watts neighbourhood of Los Angeles as a result of Californian rules
allowing a change in ownership and status if a school’s teaching body supported
it. Standards and outcomes have considerably improved. Such mechanisms could
support co-operatives throughout the public sector.
‘Payment by results’, which will increasingly become the norm, creates a whole
myriad of opportunities for expanding co-operative public services. Where public
providers have been spun off as co-operatives they have had considerable successes.
New providers such as Central Surrey Health and Sandwell Community Caring Trust
have lowered administration costs, focused more resources on delivery improved
outcomes, and increased wages. Social finance initiatives, such as social impact
bonds whereby upfront investment provides a return based on social outcomes,
could further leverage the success of these co-operatives if the market develops
further.
Professionals are often public sector entrepreneurs, and a co-operative ethos and
organisation frees them to think about how they serve their local communities.
Service user-based models such as co-operative schools can balance professional
expertise with community and service user concerns. What all these approaches
have in common is the creation of a permeable state and heterogeneity of locally
determined institutional models. That enables innovation, involvement, ownership,
and personalisation to flourish. The state slowly ceases to be ‘state-like’ and
becomes more community oriented.
What is important, however, is that cooperatisation is not a route to privatisation.
Asset locks are critical to ensure that if a co-operative service fails or, indeed,
Co-operatism as a means to a bigger society
33
proves to be a success the assets remain in public or community ownership. That
lock should be within the Articles of Association of any co-operative public service
provider or they should be Community Interest Companies which have an in-built
asset-lock. This means that assets are protected regardless of who leads from
Number 11 Downing Street.
Through the assets the state owns it can spur co-operative growth. Through the
services it provides it can rethink the way that public service professionals relate
their work to the communities they serve, freeing them in the process. The state has
direct or indirect control of a number of areas where cooperatism can be advanced.
Two of the most obvious areas are energy and housing. A new electricity generation
infrastructure needs to be built. That could be owned by large multinational utility
companies. Equally, it could be smaller scale. The village of Ashton Hayes in Cheshire
is aiming to go Carbon Neutral by investing in its own renewable power generation
facilities with a £400,000 government grant. With Danish government support, the
island of Samso has not only become carbon neutral but is actually carbon negative.
The islanders benefit financially as co-owners of a surplus energy generation. A
new energy infrastructure mixed with a co-operative ethos establishes the link
between resources and energy which is broken in purely private markets. People
are reconnected with nature which is crucial to embedding environmentalism.
Co-operative housing, common in Scandinavian countries (in fact, the co-operative
sector as a whole is almost 15% of the Swedish economy- a real third sector), creates
collective wealth and encourages a civic spirit that can create safer communities.
Again, this is an area that is controlled by the state both locally and nationally: it
finances social housing, determines planning consent, and creates capital raising
opportunities for social housing.
Finally and crucially, the state controls the tax regime. In the way it taxes corporate
entities it could provide further incentives for partnership-based, employee-owned
companies. Already, it promotes employee share ownership schemes. However,
cooperatism provides not just for share ownership. It is about partnership – almost
a quarter of workers don’t feel engaged at work according to Co-operatives UK
research. Employees should have not only a stake – important though that is – but
also a say. There is not necessarily a direct translation from one thing to the other in
practice. Entrepreneurs receive significant support in the taxation system. Ways in
which co-operative firms and providers can receive greater support through the tax
system to incentivise their creation and development must be seriously considered.
34
What mutualism means for Labour
The state as a means to a bigger society
Arguments for a co-operative economy and state can occasionally become utopian.
However, with a little imagination they can provide the left with one of the routes
out of an ideological and political impasse. It shifts rhetoric onto a softer organic
and humanistic territory. It acknowledges that the state is not the solution but
nor is it necessarily an impediment as a means to a bigger society, if its limits are
acknowledged. In doing so, it becomes a pragmatic proposition, as the examples
above demonstrate.
Cooperatism also provides a way out the failed neo-liberal, shareholder obsessed
firm model. It questions both the predominant model of the state and of the market.
Both have failed in different ways and yet we need a smart state matched with a
dynamic and vibrant private sector. We just need the state to be more strategic and
the market to achieve a better balance of long and short-term.
The left can not afford to be neutral about the way in which people interact in the
market-place and through the provision of collective services. Power matters and
the growth of co-operatism is a means to empowerment for many. Co-operatism is
also a national economic success story – growing in a time of recession – and one
which we should wish to support for economic as well as political reasons.
As in 1945, the challenge is to re-embed the market in democracy and society. It
must be done locally for that to happen: people must be able to touch and feel
social justice for it to be real. It is fraternal as well as egalitarian. The right’s approach
will lead to a shrunken state and barely expanded society. Ironically, while social
democrats will need to unpick their reflexive faith in the state, it could actually be
their trump card. Co-operatism provides one vehicle through which social democrats
can rethink the ways to secure freedom in a dizzyingly complex society. It is one
of the key elements of a new and practical politics of freedom - the essence of
the left.
Anthony Painter is a freelance political commentator and researcher. He is author
of the forthcoming ‘The human business- why the new bottom-line is social’
Cooperatism as a means to a bigger society
35
A real version of mutualism for the left
Michael Stephenson
Forged in the values of the left, and with a long and considerable track record of
success, mutualism is an idea whose time has come back
In recent years mutualism has become one of the most badly-used expressions in
political debate On the right, it has been both exploited for short-term political gain
by the Conservatives and manipulated to fit in with an under-defined and amorphous
idea of social enterprise that encompasses everything from benevolent corporate
citizenry to the unrealistic elevation of the voluntary sector to the apparent role of
key delivery agent for the bulk of the welfare state.
On the left it has been thrust into the limelight as the ‘next stage’ for Labour, yet has
never been truly recognised for its central place in the philosophy and history of the
labour movement nor given sufficient prominence in Labour’s narrative.
What we need now, therefore, is a clear working definition of mutualism that
acknowledges its legitimate place on the left of politics, recognises the political
circumstances of the right’s hijack of the term and provides practical ideas for Labour
as it rebuilds both its organisation and its policy offer to the nation.
I say this with a profound sense of duty as the general secretary of the Co-operative
Party, the organisation which more than any other, has held the ideological torch
for mutualism for more than 90 years. We have consistently advanced the idea of
mutualism through every one of our manifestos and we have dutifully played the role
of Labour’s sister party through thick and thin.
It was therefore particularly galling to witness David Cameron use the spurious
‘big society’ as an election campaign theme in 2010 when Labour’s Manifesto
included 24 specific co-operative and mutual policy ideas drawn from the
Co-operative party.
Labour should have been bolder in using mutualism as a unifying theme of its
manifesto and an antidote to the shallow opportunism of the Tories, yet Cameron
was able to somehow convince the population that their commitment to mutualism
was both genuine and long held. To compound that problem, now that the Tories
36
What mutualism means for Labour
A real version of mutualism for the left
37
and LibDems have been in power for more than a year, some on the left have
fallen for the trap of denouncing ‘big society’ as simply a stalking horse for cuts to
public services.
The Co-operative party sees this differently. The ‘big society’ is actually a much more
insidious version of Thatcherism in that it places undue pressure on volunteers or
staff to run public services and offers no hope of state assistance if those services fail
to make a profit or remain viable. Without a clear mutual governance structure that
retains them as community assets in which all members of that community (service
users and staff) have a say in how they are run, those services become vulnerable to
either collapse or the intervention of a private sector provider.
It is Thatcherism disguised as mutualism
Witness the recent case of the awarding of a large NHS contract to a private provider
(Virgin Healthcare) rather than an employee-owned enterprise (Central Surrey
Health). David Cameron made much play of the work of Central Surrey Health
and indeed praised it publicly as an ideal example of what the ‘big society’ stands
for. Yet when it came to the crunch, the progressive mutual organisation was
gazumped by the private provider, just as Margaret Thatcher would have loved all
those years ago.
The Tory narrative around ‘big society’ is not supported by either the reality of the
funding decisions made or by the organisational arrangements and structures that are
supposed to reflect it. When it comes to mutuals, the Tories and Liberal Democrats
talk the talk but don’t walk the walk.
Further, the coalition’s headlong retreat from any conspicuous mention of the
‘big society’ at either of their party conferences or any of their recent major press
announcements is clear evidence that the whole experiment is unravelling.
A lack of real support for the concept from anyone in the Cabinet apart from Francis
Maude, a lack of understanding from the public as to what ‘big society’ actually means,
the resistance of Whitehall officials to embrace and implement the agenda and the
sheer incompatibility of the notion of a mass voluntary force to run public services
with the most savage cuts to public spending have all led to the ever-quickening
demise of ‘big society’ as a credible and tangible vehicle for the advancement of
mutualism.
38
political point-scoring exercise but in terms of a much bigger progressive policy offer.
And here is Labour’s biggest disadvantage in claiming mutualism as its own. Despite
an historic array of co-operative and mutual policies in the Blair/Brown years which
saw an unprecedented handing back of power to the people, comparatively few
voters associated Labour in government with mutualism.
Remembering Labour’s mutual roots
Foundation Trust Hospitals, co-operative trust schools, football supporter trusts and
the biggest ever overhaul of the regulations governing the co-operative sector are
all concrete examples of how mutualism became reality under Labour yet despite this
decade-long record of achievement, the case was not made with sufficient clarity or
force to ensure that no Tory tanks could be parked on the lawn of mutuality.
This is in part due to the misunderstanding of mutualism, which had its roots in
the early history of socialism in this country. In the 19th century the
development of the left was characterised not only by the statist theories of Marxist
ideology and the growth of trade unionism but by the particularly and uniquely British
idea of co-operatives, friendly societies and other bodies that were progressive in
orientation but placed co-operative organisations rather than the state at the heart
of leftwing ideology.
This home-grown version of socialism promoted the idea that people could come
together to meet their common economic, social and cultural needs and aspirations
through jointly-owned and democratically-controlled enterprises.
Yet over time Labour turned its back on this practical and successful view of socialism
and increasingly embraced a statist approach that by the end of the 20th century
had become obsolete and contributed to its poor electoral performance. By taking
this misstep, the British left missed an early opportunity to reconcile socialism with
individual aspiration and the effective marriage of a genuine mixed economy with
social justice. The Labour party would learn that lesson by 1997 yet even the New
Labour experiment was in some ways a missed opportunity.
Although it ushered in an impressive range of co-operative and mutual policies
as outlined above, Labour could have been much bolder in extending the mutual
principle in areas such as housing, health, energy and social care.
The challenge for the left is to see this betrayal of mutualism not just as a short-term
Mutualism, the idea that neither the state nor the market should be the natural
default position of our public services, was so obviously consistent with the aims and
What mutualism means for Labour
A real version of mutualism for the left
39
values of New Labour, and as has been frequently observed, should have been the
next logical step in the evolution of New Labour and its programme of investment
and reform.
Further, there were institutions in the public sector such as the BBC and Network Rail
that were ripe for mutualisation but were instead subjected to reforms that neither
put them in the hands of the people that use them nor delivered the quality of service
that those users could rightfully expect.
Mutualism, should have been the
next logical step in the evolution of
New Labour and its programme of
investment and reform
And some other well-merited plans
for mutualisation, for example
British Waterways, came too late in
Labour’s term in office to guarantee
that they would be successfully
completed before the Tories came in
to unravel them.
Seizing the moment
So what can Labour do now to get this mutual vehicle back on the road? First, it
needs to embrace some specific policy ideas that exemplify the fact that mutualism
is a progressive set of ideas and something alien to the central beliefs of Conservative
ideology. An ideal example of that would be the expansion of mutual housing. A
whole generation of people have been excluded from the dream of home ownership
by the fluctuations of the mortgage market.
It is clear that conventional methods of increasing affordable housing supply through
either mortgages from high street banks or council housing will never fully meet
demand. A radical mutual housing solution based on the use of Community Land
Trusts would make sure many people could take a real step on the property ladder
and by using a mutual solution those most in need would benefit the most.
Second, it needs to advance policies that show its traditional supporters that it is
on their side on the issues that matter. The best example of this would be the remutualisation of Northern Rock, one of the failed banks that was de-mutualised
thanks to Tory legislation. Mutuals are owned and controlled by their customers.
They have been more responsible and better for savers and society than shareholderowned banks. By re-mutualising Northern Rock Labour would signal to its supporters
that it wants the economy to be about people not just profit.
The Tories and LibDems have already ruled out the Co-operative party’s proposal to
create a new mutual structure for Northern Rock. True to their real ideological roots,
they have decided to sell Northern Rock to either Richard Branson or a private equity
firm rather than return it to the mutual sector. This is a once in a lifetime opportunity
to undo the damage the Tories did to our building societies and inject some much
need mutuality in the financial services sector and Labour should be proud to call this
policy its own.
Third, it needs to promote policies that give a mutual slant to the landmark initiatives
that it brought in between 1997 and 2010. Voters need to be reminded that New
Labour did actually introduce reforms that changed our country for the better despite
the bleating of the Tory press.
The best example of this would be an unmistakably New Labour reform such as Sure
Start. The expansion of mutual Sure Start centres would send a strong signal about
Labour’s continuing legacy and provide tangible evidence of its capacity to renew its
agenda while remaining true to its progressive and reforming instincts.
Fourth, it needs to be robust in telling other parts of the Labour movement that
mutualism is a legitimate and valued part of the Labour tradition. Trade unions, socialist
societies and the membership of the party need to understand that mutualism and
the institutions that promote it like the Co-operative party, are not some estranged
member of the family. They have been at the heart of the movement for more than
150 years and have contributed ideas, resources and elected representatives to the
Labour cause for decades.
Fifth, and most importantly, it needs to never lose sight of the fact that mutualism is a
reconciliation of the traditional values of the labour movement and the imperative for
modernisation that characterised the most electorally successful period in Labour’s
history.
If socialism is the successful marriage of ideas and organisation then there is no
better example of that marriage than mutualism. Forged in the values of the left,
based on practical action which empowers the dispossessed and with a long and
considerable track record of success, mutualism is an idea whose time has come
back. Labour needs to recognise that and make it a permanent feature of what it
stands for.
Michael Stephenson is general secretary of the Co-operative Party
40
What mutualism means for Labour
A real version of mutualism for the left
41
Mutual principles may be more important
for Labour than mutuals
Gregg McClymont
Mutualism as a form of ownership is unlikely to be the main tool for dealing with
the problems facing the UK economy
To win the next election Labour must persuade people that it has a credible
alternative political economy. The current economic crisis suggests some serious
structural weaknesses in the British economy. The consensus on the left as to the
nature of the problem - with much independent academic, business and trade union
support - is that in this country, we have: an unbalanced economy which is too
reliant on the financial sector; a financial sector with a focus on short-term profit
making; a reluctance on the part of the financial sector to provide credit to domestic
SMEs; insufficient growth in non financial SMEs; and inadequate state support for
manufacturing industry, including a lack of state supported long-term finance, lack
of focus on the maintenance of supply chains in state procurement decision-making,
removal of tax reliefs which encourage capital investment, and, inadequate support
for education, and in particular apprenticeships.
From an electoral perspective, the test of mutualism’s potential therefore lies in the
degree to which it can contribute to tackling these structural problems. I will also
comment in what follows on the extent to which I think that mutuals are a viable
model for the public sector.
So I begin with mutual principles and their potential relevance to the private sector
as a whole. Some of the general principles which mutualism, and, specifically the
o-operative movement, promotes could be important for assisting an improved
growth performance. These include member economic participation, the focus on
education, information and training, and concern for community. These values could
assist with some of the problems with which firms, including private manufacturing
ones, wrestle. However, we do need to be very careful with the design of prescriptions.
Credible policymaking needs to be justified by evidence.
At the level of an individual firm, those firms which bring employees into partnership
may be able to secure two forms of benefit. First, it may lead to enhanced motivation
on the part of employees. Second, it may lead to better decision-making.
42
What mutualism means for Labour
Mutual principles may be more important for Labour than mutuals
43
Enhanced motivation may occur because employees feel more engaged in the
productive process. The advocates of mutualisation have polling evidence that
supports this. Conversely, there is also evidence, particularly in very large mutuals,
that member engagement is hard to maintain when board decision-making becomes
more complex and covers more lines of business. This may have implications for the
best way to design participation.
Arguably, better decision-making may arise from wider participation. Such
participation could include employee representation on remuneration committees.
(This is a separate benefit from that which arises due to enhanced employee
motivation). Employees may be more threatened by risk than senior management
and are therefore likely to have a greater concern for the long term viability of the
firm. If the incentives of managers are distorted by excessive short term bonuses
employee concern for a long term approach may act as a counter-balance. However,
powers held by employee representatives could also, depending on how they are
designed, be deployed to slow or prevent those changes in the productive process
which penalise labour in the short-run but which are necessary for the long-term
survival of the company. Both of these points would again suggest the need for very
careful design of governance reforms.
We also need to be looking at the behaviour of two supporting actors whose behaviour
is central to the success of all individual companies: the financial sector and the state.
If their approach were better calibrated to the co-operative principle of supporting
the long-term interests of the community, then firms in general would benefit. Banks
should be regulated so that they do not take excessive speculative risk and also to
ensure that they direct finance to British SMEs. The state must support education
and training and in particular apprenticeships. And the state also needs to direct its
own purchasing behaviour to reflect the interests of the community in functioning
supply chains, not just deploy its current focus on short-term cost-minimisation. The
state may also have to consider whether competing directly with the financial sector
in the provision of credit to SMEs is the most efficient way of ensuring that the latter
receives credit on terms comparable to those obtained by foreign competitors.
The challenge of capitalisation
Moving from mutualism as set of principles to mutualism as a form of ownership,
I think it is unlikely to be the main tool for dealing with the agreed problems facing
the UK economy. The reason for this lies in the nature of the mutual. By definition,
it is co-owned by members. The members always include the employees, but can
include a wider group of stakeholders, such as members of the community within
44
What mutualism means for Labour
which the enterprise is active. Socialists have always been attracted to this model
as a way of avoiding exploitation and empowering employees and communities. By
definition membership ownership excludes controlling external capital. The result is
that such external capital as can be obtained is more expensive reflecting the fact
that the providers of the capital no longer retain control as to the use to which it is
put. The high price of such capital means that the major source of capital for mutuals
is membership fees or profits retained from the supply of goods or services. This can
make it a good model for enterprises in which labour is the main economic input or
where there has been an historical accretion of retained profits. It is difficult to deploy
where new capital is the main input.
This theoretical analysis seems justified by international comparisons.
Even in countries with long-standing co-operative traditions, mutuals do not play any
significant role in their advanced manufacturing sectors. This is just as true for Japan,
Sweden and Switzerland as it is for the United Kingdom.
A mutual may not be the best way of organising production in a dynamic sector for a
further reason. In so far as a mutual requires employees to sink their capital into the
organisation, it may expose too high a proportion of their assets to a single venture.
One of the characteristics of dynamic sectors is that many companies will fail.
While mutuals do play an important
role in the financial sectors of many
Even in countries with long-standing
modern economies, it is unlikely
co-operative traditions, mutuals do
that they will spontaneously play
not play any significant role in their
a greater role in supporting the
advanced manufacturing sectors
domestic manufacturing sector. This
is because mutuals are the most
risk-averse form of financial player. They are risk averse because the interest of their
members is to obtain the benefit for which they are contributing e.g. life insurance,
mortgage, pension. The owners are not shareholders with diversified portfolios who
can take higher risks in pursuit of maximum possible rewards. One of the features of
lending to manufacturing industry in a particular region is that it is a relatively risky
form of investment.
This is not to say that mutuals have no role in generating growth and that they cannot
have an even greater role in the future. The examples usually given of contemporary
new co-operative start-ups are in domestic service industries. Businesses such as
Greenwich Leisure or Sunderland Home Care Associates. Service industries comprise
Mutual principles may be more important for Labour than mutuals
45
the bulk of private sector activity and these have been areas of expansion. Historically,
most labour intensive service industries have not been tradable at distance. It would
still be true of the type of service supplied in the Greenwich and Sunderland examples
- which can only be consumed where they are supplied. However, with the advent of
the internet and with the development of English as an international language, this
is no longer true of all services. To give one example, until very recently, there would
have been no market for distance-learning degrees from English universities in other
European countries. Now these are beginning to be marketed. I am not aware of
any barriers which make it more difficult for co-operatives as opposed to joint stock
companies to provide the type of service which can be consumed at a distance.
Problems in public service mutualism
Mutualism is also proposed as an alternative means of providing public services. It
is argued that mutuals are more likely to be responsive to local needs than centrally
directed public services. This could be possible: where mutuals have governing
boards with significant local representation. However, achieving the latter will be
difficult in practice. In parents, schools have a relatively continuous community of
users. Nonetheless, it is often hard to find candidates in elections for governors and
electoral turnout tends to be low. Hospitals have a comparatively low number of
continuous users. Many hospitals have become foundation trusts, a form of mutual.
Research has found that turnouts
for elections to their boards are low
and the candidates selected can be
Rather than enhancing democracy,
unrepresentative (see, for example,
the fragmentation of democratic
commentary in the editorial of the
representation may instead weaken it
British Medical Journal of 5 June 2004).
If more public service delivery units
are devolved, citizen participation is likely to become further attenuated. Elected
representatives with limited mandates may not be considered as legitimate by
communities or indeed by the management/workforce of the mutuals.
I am likewise sceptical of the claim that mutualism in the delivery of services represents
the withdrawal of an intrusive state. This seems false if the state is defined as a form
of collective representation. Under the mutual model, it would appear that the state,
defined in this way, had in one sense become vastly more intrusive – as in order to
work, it would demand a far greater degree of participation and monitoring by each
citizen. Advocates of public service mutuals argue that since citizens are dissatisfied
with both the market and the state, mutuals are a better solution. However, in my
view, the mutual does not necessarily supercede either. It is either a market provider
46
What mutualism means for Labour
with a particular form of ownership or, alternatively, it is a state provider with board
representation at sub local government level. The idea that the latter is likely to be a
more popular form of governance than central responsibility would appear counterintuitive in the face of the figures for electoral turnout. If the assumption that lower
levels of representation were more popular was true, we should have higher turn
outs for local than national elections: we do not. Rather than enhancing democracy,
the fragmentation of democratic representation may instead weaken it.
The current government’s intention is that where public sector mutuals are created
they will operate in competitive markets. If that competition becomes based on
intensive capital investment, it would seem likely that mutuals from a public-sector
background will struggle. They will be subject to the same constraints that I described
with respect to mutuals in markets that have always been open.1
Some of the advocates of mutualism argue that public services may be better
protected politically when they have local representatives on the board. There is
not much evidence of local government in Britain, let alone a less legitimate, less
organised and less resourced form of local representation, successfully moving a
Westminster government. Mutuals would only survive in the context of competitive
markets if the requirement that renders them less competitive were itself made a
universal service obligation. This would imply that the universal service requirement
was imposed by legislation on all economic actors which wished to operate in the
relevant market. For example, it might be the case that mutuals were created from
previously centrally-directed state-owned providers, e.g. foundation hospitals, and it
might also hypothetically be decided that they should have a certain percentage of
board representation from local communities. It might subsequently be discovered
that control exercised at the local-level meant they could not obtain capital to replace
machinery and buildings through loans at rates competitive with equity financed
private hospitals. One option in this scenario would be to say that every provider
that wanted to compete in hospital provision had to have the same levels of board
representation from local communities.
Where public services are devolved to mutuals operating in the private sector and
where they attempted to replace reduced state funding with fees from members
1. The Guardian of 5 October reported a roundtable discussion on mutuals (www.guardian.co.uk/
reshaping-services/guardian-roundtable-mutual-respect?newsfeed=true). The article cites the example
of an anonymous public sector “mutual” that would be 20% owned by employees and 80% owned by
a private equity firm. However, this is not really a mutual - the need for capital in this case appears to
have hollowed out the concept. At 80% ownership the private equity firm has complete control over
the company, not the employees. At 75% ownership a shareholder can, under company law, amend
the articles of association in any way the majority shareholder sees fit.
Mutual principles may be more important for Labour than mutuals
47
then this could potentially damage the productive economy. While Will Hutton
argues in favour of a process of Schumpeterian creative destruction, he also argues
that entrepreneurial risk requires a counter-balancing safety-net; a system that he
describes as “flexicurity”. Design and financing would be very important to ensuring
that fragmentation of the public service safety-net did not lead to an unwillingness
on the part of individuals to take risks in the productive economy. Where mutuals
become either underfunded or exclude large numbers of people from coverage – as
happened in many cases in the heyday of the British mutual prior to the First World
War – they pose this risk.
Towards a productive political economy
I think that the principles which inspire mutualism offer some important indications
for reforms of private sector governance and for the relationships between banks, the
state and other firms.
However, while co-operatives and other mutuals will have a role to play, it is unlikely
they have a significant role to play in capital intensive sectors, particularly the crucial
manufacturing sector.
As far as public services are concerned, where services remain state produced, one
can argue that they could possibly become more responsive where delivery units at
the local level are mutualised. Currently, the best one can say is that it is too early to
accept the evidence which exists. It does not point in the theorised direction.
Where public services are opened to competition, the success of mutuals is likely, as
in other sectors, to depend on the extent to which competition is capital intensive
or not. Where the sector is capital intensive, the principles of mutualism will not
be maintained by creating mutuals alone. The latter are only likely to survive if the
state requires all actors in the relevant sector to apply the principles of governance
deployed in the mutuals.
Serious consideration ought also be given to the risks that fragmentation of public
services, of which the devolution to mutuals may be part, could cause to cause to the
productive economy.
Gregg McClymont is UK shadow pensions minister and Labour MP for Cumbernauld,
Kilsyth & Kirkintilloch East
48
What mutualism means for Labour
Bringing mutualism back into business
William Davies
Labour should not ignore private sector reform. Mutuals are an important element
in shifting business models and practices beyond short-termism
David Harvey may not be an obvious intellectual ally of social democrats. But the
prolific Marxist geographer has an analysis of current political events in Britain and
in Europe that nobody can honestly ignore, and which the left must respond to.
Harvey defines neo-liberalism as a system for converting financial sector credit crises
into government debt crises. Dating back to the New York City debt crisis of the late
1970s, via the US savings and loans crisis of 1987-8, through the Long Term Capital
Management meltdown of 1997, Harvey traces a succession of critical moments
in which states found themselves either under-writing the risky investments of
their financial sector, or (in the case of developing economies) being bullied into
aggressive austerity programmes in order to avoid defaulting. In no case do lenders
themselves carry the risk that they have supposedly priced into the cost of debt.
By this account, the crisis that began in 2007 is simply a magnified version of this
trend (and in case this sounds like hindsight, Harvey’s analysis is contained in his
2005 A Brief History of Neo-liberalism). Most European governments, including our
own, are doubly trapped in this bind, first feeling compelled to rescue their own
banks at vast public cost, then feeling equally compelled to make unprecedented
cuts to the size of government in order to satisfy their own lenders.
Historians will look back on the period of 2007-10 with amazement at how quickly
the excesses and failures of banks became reframed in terms of the excesses and
failures of governments. 2010 has been the key year in this regard, the moment at
which public attention has turned from securing the viability of finance to reforming
and slashing the public sector. It’s interesting that David Cameron fractionally overestimated how quickly this process would take: his 2009 party conference speech
(described as ‘barmy’ by Prospect magazine) confused most audiences by arguing
that a swollen public sector was to blame for Britain’s economic ills. Within a year,
that obvious falsehood had become virtually an orthodoxy, with evidence-free
declarations that the public sector impedes growth by ‘crowding out’ business
Bringing mutualism back into business
49
activity. Whether the Coalition will have the nerve to test this improbable thesis in
the face of a second recession still remains to be seen.
What has any of this got to do with mutualism? What’s interesting about the swift
reframing of the crisis, from a problem of bad private investment to one of bad public
spending, is that it was then perfectly mirrored in policy debates about ownership
and governance. References to ‘John Lewis public services’ give some hint of how
warped the Coalition’s stance on mutualism has become: they want more ‘John
Lewises’ in the public sector, but make no discussion of ‘John Lewises’ (or for that
matter, building societies, employee-owned firms, consumer co-operatives and so
on) in the private sector. Only three years ago, the state was rescuing society from
the greatest failure of financial markets in 80 years, whereas now it is taking advice
from business leaders about how to reform itself. Three years.
And yet it is healthy that mutualism has reappeared as terrain on which to debate
political priorities and differences. Mutuals are evidence that social, political and
economic goals are not only pursued, combined and balanced at the level of society
via government, but also at the level of the organisation via governance. Any model
of ownership and governance makes more or less explicit assumptions about whose
particular interests are being upheld, be they private, public or something between
the two such as a local community
Mutuals and the public interest
A basic proposition that both left and right can agree on is that mutuals offer a
means of blurring the distinction between public and private sector. There is no
binary split between national ownership and private property, but varieties of
governance and property rights in which goods are held in common, for particular
designated uses and groups.
In the case of public services, mutualism allows them to become more private
but not fully privatised, in the sense that they become accountable to a limited
community, be they employees or users. This potentially makes public services
more sensitive to their users and better able to process the local knowledge of
employees and the local community. Labour could point out that they have already
enacted a radical mutualisation programme in the public sector, in the form of
Foundation Trust hospitals.
The extent to which such public sector mutuals act in the public interest is, as tedious
as it might sound, all in the detail. Governance models are critical here, in terms of
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What mutualism means for Labour
who gets represented, what powers they have, what borrowing arrangements are
in place and, crucially, what kind of asset lock they have in place. The asset lock –
the legal mechanism which prevents members of the mutual selling their shared
asset to the market – needs highlighting under any leftwing mutualism.
Politically, it would not be unreasonable for Labour to depict the Coalition’s public
sector mutualism as two-step privatisation, unless the government can give
extremely strong assurances about the asset lock. The public may just remember
that Tories have a record in this area, giving building societies the right to demutualise in the 1986 Building Society Act. Bradford & Bingley and Northern Rock
both seized on this opportunity, and the rest is history. If the public sector mutuals
currently being developed by the Cabinet Office turn out to have teething problems,
as they inevitably will, the question is whether the Coalition will retain its mutualist
enthusiasm, or simply revert to a standard privatisation.
It would be wrong for Labour to let the Conservatives dominate this agenda for
public services, not least because of the important precedent of the Foundation
Trusts. But equally, the left cannot be dragged into a debate that is limited to public
service reform. If mutualism blurs the distinction between public and private sector,
there must be progress made in both directions.
A critical question for Ed Miliband is how far he is willing to build on his recent
Labour Party conference speech and propose and celebrate transformations in
Britain’s private sector. This is tricky political territory, at a time of minimal growth, a
shrinking public sector and high unemployment. The last time the social democratic
left seriously considered the need to reform Britain’s model of capitalism (and not
merely its models of public service delivery, as preoccupied Tony Blair) was around
the time of Will Hutton’s State We’re In in 1995. This was swiftly dropped.
But Hutton’s argument has not become any less pertinent in the year’s hence:
quite the opposite. The dominance of the financial sector in the UK economy and
the dominance of finance over UK firms is a pressing problem. Cases such as the
Cadbury takeover capture the public imagination, while asset-stripping by private
equity companies hollows out hundreds of lesser known British firms. If Miliband
subtly builds on the platform he established in Liverpool, and is willing to repeat the
message enough, the electorate might be successfully reminded that our economic
woes originated with a series of one-way bets made by a few thousand millionaires
living in London.
Bringing mutualism back into business
51
New governance models
From here, the argument can be made that there are alternative ownership and
governance models. The target is speculation, not business (Miliband could use a
Phillip Green or two on his side to ram this point home). Firms such as John Lewis
are highly profitable. Not only that, but these alternative models produce lower
levels of inequality and greater spillover benefits (what economists term ‘positive
externalities’) for society. What, Labour might well ask, does the ‘big society’
demand of the private sector? This is an issue that the Coalition has entirely ducked
to date, despite Vince Cable’s rhetorical attack on the ‘spivs and gamblers’ in the
City and on-going review of financial short-termism.
The spillover benefits of alternative models are seen in the wellbeing of employees.
Evidence from the Chartered Institute of Personnel Development indicates that the
chief determinants of stress in the workplace are poor levels of communication from
management, lack of internal transparency, lack of any sense of control over one’s
working life and erratic decision-making. Their evidence shows that employees are
happiest in the voluntary sector, and currently least happy in the private sector.
Underpinning this is the finding that
wellbeing is closely associated with
What, Labour might well ask, does
a sense of common purpose in one’s
working life.
the Big Society demand of the
private sector?
52
perceived. A more historically nuanced and far-sighted vision would recognise the
ambivalent socio-economic character of successful business, and the ways that the
state has to pay for the spillovers of dysfunctional capitalism.
None of this is to say that employee-owned firms and mutuals do not perform
well according to conventional measures. Evidence gathered in the US and the UK
demonstrates that formally engaging employees in the ownership and governance
structure leads to clear productivity improvements and lower staff turnover. This
is in stark variance with the analysis of executive stock options, which have zero
impact upon performance, and seem only to exacerbate the divergence between
boardoom pay and business performance, as the High Pay Commission confirms.
Research carried out by Cass Business School on the employee-owned sector
discovered that it was more resilient in the face of economic downturns, and has
seen faster job creation coming out of the recession.
For the most part, however, the mutuals sector is still woefully under researched,
but the first step towards a proper understanding of it would involve measuring
their impact on employee health, wellbeing and the neighbouring environment.
These do not trump output and consumer satisfaction, but nor are they irrelevant.
Only through mutual governance models can organisations enshrine a diverse range
of goals and interests in their constitutions.
Carole Black’s report on the health
of the working age population found
that the cost to the UK economy of health-related absence was £100bn – not far
off the total budget for the NHS. A great deal of this is stress-related. There are
some clear economic gains to be made from nurturing a different business and
workplace culture in Britain. Far-sighted policy thinkers (including some around
David Cameron) have begun to wonder whether regulators and competition
authorities could account for some of these social externalities, rather than leave
it to the state to sort them out and pick up the bill. If a sink is leaking all over the
kitchen floor, a sensible response is to hire a plumber to fix the sink, not a cleaner
to continuously mop the floor.
A shift in business models and practices occurs slowly and haphazardly. What holds
it back is an orthodox view that alternative forms of ownership and governance
are wacky, unrealistic and unproven. What can enable it is a culture which learns
from successes and mistakes. The risk with mutual models is that their governance
models fail, either through too much member participation and obstruction to
management, or through too little. I am regularly asked what ‘evidence’ there is
on how mutuals work best, to which the unfortunate answer is that there is no
instruction manual, only more successful and less successful examples to be learned
from. The challenge is to enable lessons to be drawn and publicly learnt from.
Foundation Trusts had no evidence base or template when they were established,
but were an innovation that has now become established and made to work.
Recognising this may require policymakers to adopt a different view of what good
‘evidence’ looks like. Orthodox economic analysis has no critique of shareholder
value maximisation, of the majority of mergers and acquisitions activity, of shortterm private equity buy-outs, because these are all classed as ‘efficient’ within the
narrow, short-term, neo-classical definition of efficiency through which they are
Labour’s challenge
The Labour party needs to do three things. Firstly, it needs to set out a series of policy
measures aimed at enabling the creation of more mutuals and employee-owned
firms in the private sector. These measures should include the re-introduction of tax
advantages for employee benefit trusts, which can be funded through reducing or
What mutualism means for Labour
Bringing mutualism back into business
53
removing tax advantages in other share ownership schemes. The other area where
there is still scope for private sector regulation and innovation is in facilitating finance
for mutuals. One major obstacle to the sector’s growth today is that mutuals cannot
access the equity markets, and are therefore dependent on debt finance at a time
when there isn’t much around. But we currently have a number of fully and partnationalised banks (plus the Post Office) that could be used to assist in this regard.
Secondly, it needs to define public sector mutualism as clearly as possible, and then
come down hard wherever the Coalition’s policies depart from this. The truth is
that the Coalition is most likely uninterested in whether their new public sector
mutuals are still mutualised in ten years time, but Labour should be aggressive here.
Anything less than a water-tight trust-based model, closed to carpet-baggers, may
as well be a privatisation, especially when it is forced on staff against their will.
Thirdly, Labour can learn from and partner with organisations with expertise in this
area. In addition to the Co-operative Party, Mutuo (the mutuals trade body) and
the Employee Ownership Association have the most insight into the benefits of
mutualism and the current obstacles to its growth. But equally important is that
the left identifies innovative and plausible new models that are emerging on the
horizon, and seeks to understand how new forms of private sector co-operatives
can be enabled.
employees and investors to take decisions over longer time horizons, with a more
nuanced understanding of the human factors of production. Private sector mutuals
are more patient and less mercenary organisations, profit-making but not profitmaximising (though as John Kay points out in his analysis of ‘obliquity’, often the
best way to create profit is not to focus on it too hard).
Discussing private sector reform is difficult for politicians, which partly explains why
public service reform has preoccupied policymaking for the past fifteen years. To
do so successfully, they need allies in business and civil society, who are able to
speak out when governments cannot. Sitting at the overlap between the public and
the private spheres of our economy, mutualism offers an ideological and practical
path that Labour can proudly tread. But in doing so, Labour must oppose excessive
centralisation, high-stress work practices, poor governance and inadequate
transparency wherever they are present, in any sector, not only the public sector.
Mutualism is not, as the Coalition presents it, just another way of beating up on
government.
William Davies is research director at the Centre for Mutual and Employee-Owned
Business, University of Oxford. He is also an associate of Demos, and author of
Reinventing the Firm (Demos, 2009). His blog is at www.potlatch.co.uk
Politicians love to celebrate innovation, as David Cameron’s pledge to turn east
London into a new Silicon Valley demonstrated. Why not then declare Britain to
be an innovation lab for the creation of new organisations and new organisational
forms? Britain gave the world limited
liability companies and worker coIf there are two values that need
operatives – what else can we come up
with? Experimenting with governance
to be embedded in any post-crisis
and ownership models is considerably
economic culture, they are a more
less fluffy than The ‘big society’, which
patient attitude towards the future,
is everything and nothing.
and greater respect for wellbeing
If there are two values that need to be
embedded in any post-crisis economic culture, they are a more patient attitude
towards the future, and greater respect for wellbeing. Both of these have been
corroded by the emphasis on maximising short-term earnings, in all walks of life.
It is no good just name-checking these values, like an empty company slogan.
Institutions need building and re-designing, in ways that allow for managers,
54
What mutualism means for Labour
Bringing mutualism back into business
55
Mutuality and economic relationships
Andrea Westall
Mutualism is not a panacea, but carefully considered it can serve as an antidote
to the excesses of both individual and corporate behaviour
Social democracy, in its present form, is finding limits as it struggles to accommodate
societal, economic and environmental trends and challenges. ‘Mutuality’ seems
to respond, and offer solutions, to issues which flow from what is perceived to
be a widespread and excessive individualism, or the overly top-down nature of the
state.
Reasons for that individualism are often located within a discussion about the
pervasive penetration of neoliberal, or rather simplified neoclassical economics, or
business mantras − which have affected everyone’s way of thinking about, managing
and developing our economy, and seeped into other aspects of our lives. But it is
also worth considering how this way of being is also reinforced (perhaps counterintuitively for those accustomed to blaming the right) by some of the long-term
effects of leftwing and social democratic direct action and strategies for change.
Think, for example, about some of the negative as well as the positive effects of
individual social mobility.
Recent commentators have started to address some of the related shortcomings
of social democracy by looking at the importance of, and lack of attention to,
relationships between people. Mutuality is part of this debate – but refers perhaps
to something stronger – that of reciprocal obligations between people, with the
implication of, or attempt to create, equal respect and power. It is also, and often
separately, looked at as a way of reconfiguring the way in which the economy
engages and rewards people differently in production and service delivery, as well
as reducing the power and control of free-floating finance. But in all these senses,
as well as its focus on relationships, mutuality creates profound challenges for
social democracy.
There has recently been renewed interest in employee ownership and employee cooperatives. However, most activity and focus has been on public services, across the
left and right of politics. It seems as though the idea of alternative business forms in
general, rather than for specific and identifiable ‘market failures’, is too threatening
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What mutualism means for Labour
Mutuality and economic relationships
57
or perceived as rather ‘flaky’. And the idea of promoting or recognising mutual,
collaborative, or relational behaviour as a way, for example, to achieve economic
resilience, wellbeing or innovation, (even if a core part of how economies actually
behave or how people have always organised together), is less widely discussed.
Because of these omissions, as well as the breadth of the term ‘mutuality’ − from
specific legal organisational forms in finance; to a catch-all for organisations that
are owned and controlled by stakeholders other than shareholders; or for activities
creating mutual gain from shared interest and activity – it might be helpful to take
a slightly different way in.
Different kinds of economic relationship
Policy Network’s Oslo conference on Progressive Governance in May 2011
highlighted some of the problems with our current economic system. Participants
at the event, and contributors to the accompanying reports and literature, variously
suggested that there was an overall need to humanise capitalism; and, related to this
discussion, that: trust entails an equal expectation of cooperation; the emphasis on
shareholder value has eroded cooperation between groups; ‘The market … crowds
out altruism’ – quoting Peter Singer; and that too great a focus on competitiveness
can create a more conflictual society.
Pascal Lamy thought that overall the current social democratic economic model
ignores the impacts of globalisation and sustainability, or the insights of a more
anthropological approach to understanding or implementation. All these phrases
and musings share the implication that we should focus more on the impacts of
our economic system on people, and how different kinds of relationships between
us might ameliorate and provide ways and insights to change some of the more
negative effects.
In the mid-90s, the left discussed ‘new mutualism’ for similar reasons, as well as
thought about and considered very diverse forms of organisation and business.
There were also parallel and linked discussions about local economies − mostly the
way in which small firms in certain local areas were networked together, shared
functions, and were collaborating, competing and innovating. Then the emphasis
was on the alleged superior effectiveness and competitiveness of such approaches,
rather than their personal impacts.
It would be useful to revisit such discussions, rather than forget about them or
start completely afresh. But we also need to think anew, and not be affected too
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What mutualism means for Labour
much by the power of historical examples, in order to address current challenges
and concerns. For example, we might add questions of how more connected local
economies could provide and create ‘resilience’ in the face of outside forces.
So let’s focus for a while on the role of different kinds of more collaborative or
supportive relationships between people, stakeholders and organisations within
the economy. This could help tackle the over-individualisation of politics and
economics, as well as the over-emphasis on competition above collaboration.
We might therefore consider:
• Relationships (formal or informal) between people who are similar (perhaps
self-employed people such as driving instructors, who wish to come together
to balance what might otherwise be their weak power vis-à-vis large driving
schools);
• Relationships between people who are different (groups of small businesses
or self-employed in an area who might wish to share workspace or create joint
childcare facilities);
• Relationships between people and functions within or across organisations or
businesses (through corporate and business governance models, or network
relationships involving different stakeholders);
• Relationships between businesses (or other organisations) who are similar (for
example co-operative buying or marketing groups or the linkages between
economic actors in ‘distributed’ economies outlined by say Robin Murray in
his report Danger and Opportunity: Crisis and the new social economy for
NESTA);
• Relationships between businesses (or other organisations) which are different
(for example, local economic decision-making and planning).
All these relationships might be more or less ‘mutual’. Some might be just about
creating spaces for dialogue and increased understanding to generate trust,
knowledge, and potential connections. Others are about benefiting from a
thicker development of mutual reciprocity and obligation, arising from repeated
interactions.
We can also look at some of the statements that have been made, both within
these pages and elsewhere, about the potential benefits of increased relational
activity within the economy (beyond the clusters and hi-tech networking that we
are used to hearing about).
Mutuality and economic relationships
59
For example, there is a view that solidarity with others can reduce isolation. What
might that suggest? Perhaps groups of homeworkers could meet together in local
areas to support each other and share resources.
Or we might think about how joining together can protect against exploitation, by
increasing collective and individual power and voice. This obviously relates to the
history and development of unions. But there is little collective action, for example,
amongst the self-employed, as indicated above, who can suffer as a result of their
weaker economic power in contracts, or in purchasing affordable resources.
And what about shared resource use by small business to reduce costs and waste.
There is also the observation that diverse groups can be a better way of making
appropriate decisions by increasing understanding (avoiding we-think) and
generating shared commitment to and ownership of change in complex situations.
We might think here about multistakeholder decision-making groups (including
perhaps political representation) that pursue joint R&D or, as part of interrelated
networks, focus on changing entire systems such as energy through market
transformation (not just dealing with market ‘failure’).
I also suggested similar approaches as part of Rethinking Associative Democracy
as conceived by Paul Hirst. His concern was to extend economic governance
throughout the economy and society, breaking away from the limits of a top-down
statism or dislocated localism. Within that edited book, Penny Shepherd also talked
about how peer groups within finance, doing similar roles, might create codes of
conduct, points of belonging and mutual sanctions to support more ethical (and
supported) behaviour within the industry. To what extent this requires a strong
version of mutualism, or a weaker sense of network or collective institution, is moot.
However, this way of thinking enables us to consider ways of catching hold of, and
managing or controlling, the potential excesses of both individual and corporate
behaviour (beyond corporate governance or regulation).
But even regulation might benefit from a thicker and more relational approach. The
tendency is often to think about the merits or de-merits of self-regulation versus
more top-down forms of regulation. Within a complex and fast-moving area, and
to prevent gaming, the idea of using different places and spaces for rule making
and sanctions creates what Peter Grobosky has called ‘complex webs of regulatory
influence’ rather than a simplistic either-or model.
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What mutualism means for Labour
Other potential impacts relate to how feelings of trust, and ongoing mutual
commitment and obligation, might reduce the need for one-off contractual and
transactional relationships. There is an example in Wales of farmers working
together co-operatively to adopt standards, mutually-monitor, and, by doing so,
reduce the costs of government inspection regimes.
These examples tend to focus on the positive. But it is important to recognise the
potential negatives − free-riding, lack of commitment, self-seeking behaviour − and
also the flip-side to the strong version of mutuality. For example, there has been
much attention to peer-lending groups where people (often women) mutually
guarantee, commit and support each other to borrow and repay loans. Benefits go
beyond access to finance and relate to say increases in self-esteem, wellbeing, or
business commitment. Less recorded though are some of the more negative mental
and physical effects resulting from the guilt and shame of those who cannot repay,
or the disruption to traditional gender or personal relationships that can arise from
increased self-esteem.
Organisational models
The usual focus of mutuality discussions in the economy has often been around
organisational models, which is partly why this essay did not start there. Much has
already been said, by Will Davies and others, about the potential benefits of, say,
employee co-operative and ownership models.
There is a danger, though, with some of the current preoccupation on employees
that other ways of structuring mutual businesses for different purposes, and to meet
different needs, gets lost. We should also think about consumer-citizen ownership or
complex, and sometimes more relevant, examples of multi-stakeholder ownership
and governance.
In addition, the activities of different economic sectors are more or less in the
public interest. This is not just an issue of monitoring and regulation, but also
about considering appropriate governance and ownership structures for those
sectors where it is important to incorporate future generations and environmental
concerns, or which are core to our economy and wellbeing. We could think more
creatively about business models that mix shareholder ownership with elements
held in ‘trust’, or public interest representatives, or golden shares, to better enable
the wider public interest.
Mutuality and economic relationships
61
Another aspect to these debates on organisational from is to recognise the benefits
of a plurality of business forms across the economy to increase resilience and
innovation, as well as to better meet different stakeholder needs.
Challenges to economics
Anthony Painter shows in his chapter that much of the current interest in mutuality,
and increased relations between people and businesses, has partly drawn on the
thinking of Karl Polanyi to find ways to constrain our behaviour and the economy,
and to better realise our wellbeing and security.
The simplified neoliberal version of neoclassical economics which affects our current
policy and reality, struggles to engage with mutuality and relationships between
people and businesses. It is based primarily on individualistic assumptions (even if
tempered and extended through ‘behavioural’ economics).
In 2009, however, the Nobel Prize was awarded to Elinor Ostrom for her work on
the management of common resources, not through top-down expert control,
but through complex interactions between people and organisations, rules and
norms developed and reinforced in situ. Her work in political economy draws on
institutional as well as anthropological approaches and understandings of group
behaviour. This kind of work could be further explored and mixed with other
disciplines − from economic geographers to development specialists or ecological
economics − in order to improve our understanding and ability to embed and
support resilient, sustainable, adaptable and innovative economies, or to realise
more relational ways of responding to personal and interpersonal wellbeing.
Challenges to social democracy
In his chapter, Tristram Hunt sets out the development of co-operative and mutual
activity, and its relationship to Labour’s history. In a highly simplified version of
what has happened, the Fabian top-down statist tradition, as well as the practical
development of collective action through for example, the welfare state, has pushed
out the importance and viability of more mutual responses.
Mutuality, as well as voluntarism, is often seen as contributing to the opposite of
collective welfare through charges of ‘post-code lotteries’ and ‘exclusivity’. But while
these debates, and the tensions between them, are important and will continue,
they are not really ‘either-or’ but rather balances to be constantly negotiated. And
think about how forms of more ‘horizontal’ collaboration between people, very
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What mutualism means for Labour
different to top-down control or management techniques, challenge the role of the
social democratic state.
There has also been discussion of social democracy’s ignorance or ignoring of the
economy, relying on an undifferentiated ‘growth’ to be redistributed for ‘social’
goals. The response has been to belatedly recognise the ‘limits of markets’. But it
goes further. What is needed is a wholesale discussion about the nature of growth
itself and a recognition that ‘growth’ is only the outcome or epiphenomenon of
economic activity. Part of that discussion therefore relates to the forms of economic
activity, which will involves different aspects of mutuality and relationships between
economic actors.
In the mid 90s a discussion around mutuality and more connected economies
faded away mostly because of the reasons set out above, as well as the impact of
neoliberal, neoclassical and business truisms which suggested certain specific and
‘right’ ways of structuring things.
Of course unions, and forms of co-operative and mutual economic activity, or the
benefits of networks and partnerships, have continued to develop. There have also
been many experiments in more relational and mutual ways of working at local
level. But a side effect of this focus on simplistic economics was that such examples
were often seen as responses to ‘market failure’.
This implied deviation from market ‘normality’ makes it difficult for social democracy
to be transformative. And ‘market failure’ remains the primary justification for
policy and action. It has also made people unable to ‘see’ useful alternatives. For
example, there are many interesting approaches and ideas with relevance to this
discussion, within what is variously called the ‘social economy’, ‘social innovation’,
‘social investment’ or ‘social business’. Much of what is covered by these
terms actually concerns restructured power relations; different forms of social
‘ownership’; sustainable economic development; or innovative ways to finance
productive activity. However, the emphasis has primarily been on ‘outcomes’ and
their perceived relevance to rectifying the failures of the dominant market, rather
than providing alternatives or developments.
This lack of focus on process is reflected more widely in social democracy’s
tendencies to prefer ends to ‘means’. Process seems to be equated or thought
about purely as bureaucratic rigidity and form filling.
Mutuality and economic relationships
63
And, overall, social democracy, whether within its economics or societal thinking,
still seems to be based on individualism. This applies to government’s relationships
with businesses, organisations in the third sector, or people. Business policy tends
to prioritise top-down tax incentives, for example, rather than the messiness of
industrial policy. In sectors like housing, for example, we might think about how
community land trusts could better enable affordable housing over the long-term,
rather than focussing primarily on individual houses or the need for personal
wealth. They could also enable
more control over development,
Social democracy, whether within
particularly in areas that are
its economics or societal thinking,
‘regenerated’, nominally for the
still seems to be based on
people or businesses located there,
individualism
some of whom, however, will have
to move on and out, because of
increased land and house prices.
This is perhaps another example of how to increase citizen and political control
over our economy.
Limits and challenges
We have already seen how mutual ownership models may or may not be able to
incorporate or deal with the wider public interest, particularly of the environment
or future generations.
And this whole area is also under researched, prone to unsubstantiated belief,
and cross-disciplinary. We need to more fully think about and evaluate examples
and propositions to realise their possibly transformative impacts, rather than
just focus on narrow comparisons with the status quo (for example, on relative
competitiveness). But we also need to recognise that there may be trade offs
between mutuality and efficiency. However, that may not be a problem in all cases
− particularly if you take a wider view of impacts and the benefits of particular ways
of doing things.
64
the level of required self-esteem and emotional intelligence seems all too rare and
possibly even unobtainable. It challenges our skills and habitual behaviours and
also suggests that some situations may benefit from disinterested facilitators to set
ground rules to maximise mutual behaviour and benefit.
Ways forward
Mutuality could be part of rethinking and developing social democracy to better
reflect and incorporate the importance of relationships between people and
businesses within the economy.
But there are many blockages − mental, conceptual and practical − that have
prevented us from thinking and acting in this way. We need to consider these
systemic issues, as well as further exploring the practical implications and policies
that flow from this way of thinking.
These approaches may also enable us to re-embed the economy in political
decision-making and human control as well as consider more transformative ways
of developing a more subservient finance system, or a more sustainable and resilient
economy which better engages people and allocates appropriate return.
We might also think more about how to develop and give ‘permission’ for this
way of working. But do our life histories or work experiences enable us to work in
a more collaborative way with colleagues, or in our interactions and networking
across different organisations or sectors? Why do we in the UK find ideas of
social partnership and dialogue difficult and what does that mean for the more
confrontational styles of employee representatives like unions or business lobbies.
Or what about the teaching in our business schools and economics departments, or
for our civil servants − which very rarely talks about diverse business models, and
motivations, or broader ways of thinking through economic challenges, analysis
and ways forward?
As mutuals get bigger, it is challenging to retain the benefits of ongoing personal
relationships. And relatedly, there needs to be more attention to corporate
governance and accountability within large-scale co-operatives and mutuals, just
as much as for shareholder owned corporates.
There is much that flows from this kind of discussion. These thoughts are not therefore
about a few ways to pluralise the economy, or to improve employee wellbeing and
productivity. It is potentially a lot more fundamental and transformational for our
economy as well as our social democracy.
Mutuality, especially amongst different people or organisations, also requires a
level of mature and robust debate not simple conflict or grudging consensus. But
Andrea Westall is a strategy and policy consultant
What mutualism means for Labour
Mutuality and economic relationships
65
Beyond mutualism and towards
the ‘big economy’
Adam Lent
Social democrats need to embrace the ‘big society’ ideal and extend it into the
economic realm
In his essay for this pamphlet, William Davies makes the observation that while the
Government is very keen to roll out the mutual model in public services, they seem
uninterested in extending that model into the private sector. Labour’s response, he
argues, should be to embrace mutualism in public services but argue also for the
idea to be promoted across the whole economy.
Davies‘s point is important but if the left is to genuinely respond to the right’s
intellectual resurgence, we must think beyond the organisational models implied
by mutualism.
To explain why, it is important to recognise that the Government’s focus on mutualism
arises not because they think John Lewis is a great company nor because as some
critics imply because mutualisation is one step on a path towards full privatisation.
For the Government, mutualism in the public sector is clearly part of their much
wider ‘big society’ agenda. There has, of course, been a great deal of fun had at
the apparent vagueness of the concept. There is also hostility towards the idea
with many fearing that it is simply a cover for the cuts programme. Both of these
perspectives are misplaced. The ‘big society’ concept is simple rather than vague
and meaningful rather than cynical.
The simple idea at the core of The ‘big society’ is that certain functions or aspects of
functions we have got used to being carried out by the state on behalf of a passive
citizenry should now be conducted by that citizenry themselves.
Far from being a shallow cover for cuts, it is an idea that has strong historical roots
in Conservative thinking and was updated in the early 1990s by leading members
of the party such as David Willetts. Indeed, Willetts was worried not just by an
over-weaning state but also by the way Thatcherite individualism was apparently
sweeping away pro-social activity and the civil society institutions and norms that
enabled such activity.
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What mutualism means for Labour
Beyond mutualism and towards the ‘big economy’
67
The ‘big society’ idea is important and will probably grow in resonance for a
number of reasons. Firstly, it does chime with a strong strain in British culture
that distrusts the state, and hierarchy more generally, and favours individual and
collective autonomy and initiative. The liberal notion that if an individual or group
wants to get on and do something then they should have the right to do so is strong
in the British mindset. A politician underestimates the influence of John Stuart Mill
at their peril.
There are of course strong contradictory strands in British culture that exist
simultaneously such as the widely held view that the state is simply a service that
one can make demands upon in return for payment of taxes. But it is just this
mentality that the ‘big society’ idea sets itself against and which few if any social
democrats would endorse.
Secondly, it is certainly the case that public spending will shrink considerably over
coming years. The notion that this trajectory can be entirely defeated is wrong.
Even if the Coalition Government were to fall and were replaced by Labour, the
new Government would be making close to the same level of cuts over a timescale
that was only two years longer at
the most. Of course, the cuts may
A politician underestimates the
fall in different places and taxation
influence of John Stuart Mill at
may take a slightly higher burden
but there would still be a significant
their peril
scaling back of public services.
Our response to this shrinkage can take three forms. Either we simply accept poorer
and smaller public services. Or we protest and demand that the state continues to
do what it always does. Or we opt for the less apathetic or unrealistic option which
is to explore ways in which citizens and services can work together to accommodate
the decline in funding.
Thirdly, and most importantly, the ethos of the ‘big society’ picks up on important
developments in the wider economy. The spread of the interactive web is rapidly
breaking down some of the traditional hierarchies that exist in our economy and
are placing once passive consumers at the heart of business practice.
For example, companies are increasingly relying upon consumer generated
innovations to refine and create new products and markets. Indeed, the very
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What mutualism means for Labour
distinction between producer and consumer is blurring in many areas. The app
market and the on-line game Second Life have allowed consumers to transform
themselves into producers and generate incomes. While the early stage technology
of stereolithography holds out the promise for consumers to actually become
manufacturers of commodities.
As a result, the web has the radical potential to widen the range and number of
individuals participating in entrepreneurial activity as they find they have access to
the resources for design, marketing and distribution that were previously reserved
for an elite. In short, like the ‘big society’ vision for the public sector, the private
sector also seems to be moving towards an ethos where individuals and groups of
individuals take on roles once reserved for the corporate hierarchy.1
These trends and values are much wider and more radical than the mutual model
alone. This is not to denigrate this model which, as William Davies shows, has a great
deal to offer but alone it does not capture those economic developments which
are about a spontaneity in and democratisation of entrepreneurial and corporate
activity that stretches beyond internal concerns about governance or organisation.
As a result, the ‘big society’ ideal is a lot closer to the emerging zeitgeist and to
new economic trends than
mutualism.
The ‘big society’ ideal is a lot
closer to the emerging zeitgeist
and to new economic trends than
mutualism
As such, I would suggest the left
goes further and wider than an
enthusiasm for mutualism and
instead adopts the Conservative
emphasis on the ‘big society’ in
the public sector but urges the notion to be extended into the whole economy – a
‘big economy’ maybe. So just as the ‘big society’ seeks to challenge the established
hierarchies of public services by empowering users, so the ‘big economy’ would
seek to break down the established hierarchies of corporate Britain by empowering
a new breed of online entrepreneur and consumer.
What might such an alignment of social democrats with those transforming our
economy mean in practice?
1. Further details on the way the interactive web is changing business practice can be found in:
Boston Consulting Group, Connected Kingdom: How the Internet is Transforming the UK Economy,
Google, 2010; Adam Lent & Matthew Lockwood, Creative Destruction: Placing Innovation at the
Heart of Progressive Economics, ippr, 2010; NESTA, The New Inventors: How Users are Changing
the Rules of Innovation, 2008
Beyond mutualism and towards the ‘big economy’
69
Research agenda: Moving forward with mutualism
At the very least, it must mean seeking routes to greater equality and social mobility
through policies that promote the creation of the most modern and competitive
economy based upon these new business practices. That requires something of a
shift away from the social democratic default position of always looking to tax and
benefit models and spending on public services as the only route to a fairer society.
Michael McTernan
This collection of essays seeks to develop a clearer vision of mutualism and its
application to social democracy. They demonstrate the importance of this multifaceted
concept and its relevance in terms of the principles and values which flow from its rich
and historic tradition in the Labour movement; its role in recasting public services and
ensuring a more effective and dynamic balance between the state, marketplace and
the civil society; and its role in private sector reform, promoting diversity of ownership,
sustainability, well-being and new frameworks for stakeholder capitalism.
It means accepting that the state’s role must increasingly be about ensuring that
investment flows to the most innovative parts of the economy, making sure we
have the right skills to exploit those
innovations and pushing British
We need to combine an
business to complete in the most
unashamedly pro-active state-led
vibrant and toughest markets. It
industrial policy with a language
means championing and supporting
that reflects the radical spirit of
those companies, innovators and
openness, creativity and new
entrepreneurs with the knowledge
frontier entrepreneurialism that
and will to use the interactive web to
characterises the web
create and reach new markets.
The intellectual task for European social democrats is now to engage with the questions
raised. In the productive economy, what sectors offer most potential for mutualism,
and how can regulatory, capitalisation and economies of scale barriers be overcome,
both at the national and EU-level? Can co-operatives and mutuals grow and remain
successful?
But this cannot be simply a retread of
New Labour’s economic policies. Indeed New Labour’s greatest failing economically
was that while it talked a good game about investment, skills and productivity, it was
not nearly forceful enough in taking on the business inertia and complacency that
has long hindered the UK economy. Instead we need to combine an unashamedly
pro-active state-led industrial policy with a language and tone that reflects the
radical spirit of openness, creativity and new frontier entrepreneurialism that
characterises the web.
In public services, how can Labour promote mutual models so that they emerge from
under the shadows of austerity, putting greater power in the hands of local users?
How can equal access to and quality of services be maintained nationally?
Mutualism undoubtedly has a part to play in this but it is a supporting rather than
a leading role.
Labour must now act to build political momentum and support for mutual and cooperative ideas that can strike a chord across society. Importantly, this should be done
in co-operation with European partners, sharing a rich history of mutual practices and
experiences. To this end, Policy Network will be working with UK partners, and with
the Foundation for European Progressive Studies, Gauche Réformiste Européenne and
Solidar at the European level, to critically engage with mutual models and their ability
to inform new pillars of political economy and public service reform.
And with electorates increasingly insecure and anxious about the future, can the
old principles and values of mutualism – solidarity, co-operation, reciprocity, and
community empowerment – provide a new political anchor for the centre-left,
reconciling people with social democracy?
Adam Lent is director of programme at the RSA
Michael McTernan is editor and senior researcher at Policy Network
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What mutualism means for Labour
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Research agenda: Moving forward with mutualism
Recent Policy Network publications
Southern Discomfort
This pamphlet is the sequel, one year on, to Southern Discomfort
Again, a study which sought to address the crippling weakness
that Labour now faces in Southern England after its catastrophic
2010 election defeat. In this pamphlet, we have focused our
qualitative research on the Midlands as a microcosm of the
English electorate. Following Labour’s 1992 defeat, the original
Southern Discomfort series revealed that floating voters were
aspirant and upwardly mobile. Today, they are far more cautious
about their own prospects, prioritising security and a better
future for their children. This group feel more insecure and
vulnerable than ever in the wake of the global financial crash
and the dramatic squeeze on living standards. At the same time,
widespread disillusionment with politics and politicians is now
endemic in Britain.
Restoring trust, both trust in politics and trust in Labour’s
capacity to manage the economy, will be critical to the party’s
prospects of electoral recovery. This pamphlet addresses how
Labour can fashion a political strategy that will enable it to win
next time, escaping the impotence of opposition and become
once again the natural party of government in British politics.
Southern Discomfort
www.policy-network.net
Policy Network is an international thinktank dedicated
to promoting progressive policies and the renewal of social democracy
www.policy-network.net
ONE YEAR ON
By Patrick Diamond and Giles Radice
www.policy-network.net
Policy Network is an international thinktank dedicated
to promoting progressive policies and the renewal of social democracy