Labour’s 2017 manifesto For the Many, Not the Few will be remembered as one of the most significant in the party’s history, the spark that ignited the remarkable surge in support that denied the Conservatives a majority.
It was a classic social democratic programme that shone in comparison with a nihilistic Tory prospectus and a series of recent Labour offerings hedged by caution.
Helped by its — perhaps — deliberate leaking to the press, the manifesto cut through to an electorate prepared to listen to the simple message that an active, intelligent state can play a critical role in establishing the foundations for a shared economic prosperity. Set against Conservative pessimism that nothing much can ever change, Labour’s programme communicated an exhilirating sense of agency and possibility.
It is reasonable to assume that the document will form the basis of the manifesto that succeeds it. But a fascinating paper published on the eve of the election offers insights into a rich seam of contemporary Labour thinking that informed significant aspects of For the Many, Not the Few, and that may find fuller expression in the next programme the party takes to the country.
Alternative Models of Ownership
Alternative Models of Ownership, written by a group of economists, academics and councillors, was delivered to its commissioners, Shadow Chancellor John McDonnell and Shadow Secretary of State for Business and Industrial Strategy Rebecca Long-Bailey, earlier this year.
It’s a brief 48 page document with an unassuming title. But the content is incendiary, revisiting and refreshing the historic socialist insistence that economic development can only work for the collective good if the economy is guided by democratic oversight. The radical tone is set by a stark opening paragraph:
The predominance of private property ownership has led to a lack of long-term investment and declining rates of productivity, undermined democracy, left regions of the country economically forgotten, and contributed to increasing levels of inequality and financial insecurity.
The paper goes beyond the centre-left preoccupation with redistributing the wealth generated by the market economy, claiming that the fundamental issue is deeper, a flaw in the DNA of the capitalist system: the chronic short-termism characteristic of the privately owned firm.
Left to their own devices, the paper argues, private companies will always prioritise the award of shareholder dividends over long-term investment, and, if it is available, always choose to take on low paid labour rather than sink capital into new technologies and organisational methodologies that will take time to bear financial fruit in the form of higher productivity.
There will never come a new dawn when an optimal market economy ushers in a bright day of shared prosperity. The private sector will never work for the collective good: the only way of addressing the inefficiences and injustices endemic to the capitalist system is to assert democratic control over the economy, to reassign responsibility ‘for running companies away from those with an interest in extracting value towards those whose interest lies in their long-term viability and growth’. For the authors of Alternative Models of Ownership, the distinction between economic and political democracy is a false one:
There is a commonplace implicit assumption in UK society that there is a natural separation between the political and economic realms, with democratic structures and processes only applying to the former. The economic realm, unlike the political realm, is deemed too complex and sensitive to be treated in the same way, and in consequence of the lack of democratic process, economic decisions are often made by, and on behalf of, a narrow elite, with scant consideration of the well-being of the general population.
Only democratic oversight is adequate to the task of ensuring that capital is invested in productive activity, in skills and technology rather than speculative activity. Only democratic oversight can ensure automation works for the collective good, not just the owners of capital and a technocracy of highly skilled engineers. And only democratic oversight can ensure economic activity is directed towards meeting existential challenges such as climate change.
Back to the future
In brief, the paper’s advocacy of economic reconstruction rather than redistribution seeks to move Labour in an explicitly socialist direction.
Its focus on economic democracy recalls several philosophical currents within Labour’s political tradition, ranging from guild socialism to the cooperative movement, to the Marxist ideal of workers’ control of the means of production. There is also a strand of fashionable socialist futurism in there, as evidenced by a passage strongly redolant of Nick Srnicek and Alex Williams’s Inventing the Future:
The goal should be to embrace the technological potential of modernity, accelerating into a more automated, productive future with all its liberating possibilities, while building new institutions around ownership, work, leisure and investment, where technological change is shaped by the common good.
But the paper’s language of ‘democratic control’ and ‘economic democracy’ perhaps most closely follows a current of Labour thought that was last prominent in the early and mid-1970s, a politically formative period for both John McDonnell and Jeremy Corbyn.
The industrial unrest of the early 1970s, and the election of a Labour government on a radical manifesto in 1974, had encouraged the party’s left to hope that a profound transformation in the fundamental structure of economic ownership was possible. The miners’ strikes of 1972 and 1974 had highlighted the capacity of a strong union movement to bring down a Conservative government. But the most intriguing instance of union militancy during the period was the 1971 Upper Clyde Shipbuilders (UCS) ‘work-in’ led by Jimmy Reid.
Rather than taking conventional strike action the UCS workers had simply occupied the shipyards in defiance of management and taken over production themselves. This seeming demonstration of the capacity of workers to take over and manage an enterprise without a layer of capitalist management helped inspire an ambitious election manifesto emphasising economic and industrial democracy.
Britain Will Win With Labour promised a National Enterprise Board that, in its own words, would ‘plan the national economy in the national interest’ by taking over ‘profitable sections of individual firms in those industries where a public holding is essential to enable Government to control prices, stimulate investment, encourage exports, create employment, protect workers and consumers from irresponsible multinational companies’. The manifesto also proposed taking a range of new industries into public ownership and extending worker influence on company boards.
Tony Benn, Trade and Industry Secretary in the new government, drew up an uncompromising White Paper for an Industry Act that would go even further than the manifesto, aspiring to nothing less than the replacement of the traditional model of the capitalist firm with enterprises owned and run by workers prioritising ‘socially useful’ production.
It was a heady ambition symbolised by the celebrated ’Alternative Corporate Plan’ drawn up by workers at the military firm Lucas Aerospace.
Facing the struggling company’s closure the firm’s 13,000 employees were encouraged by Benn to suggest how they would use its resources if they were granted control. The document they submitted recommended repurposing the company’s capacities for civilian ends, with a strong focus on renewable energy technologies.
In his gripping history of Benn’s turbulent period at Trade and Industry, That Option No Longer Exists, John Medhurst suggests that in seeking to recast work as a channel for self-determination the plan gave contemporary expression to an old libertarian strand in the socialist tradition:
Although few thought of it in explicitly socialist terms it was in embryo William Morris’s ‘factory as it might be’ — a place of work where workers utilised their innate creativity to increase their own job satisfaction and to benefit society rather than a corporate balance sheet, the very application of ‘useful work versus useless toil’. The logic of the Alternative Corporate Plan was profoundly anti-capitalist and if widely implemented would pose a fundamental threat to British management’s right to manage.
The White Paper was abandoned when an alarmed Harold Wilson moved Benn away from the Trade and Industry portfolio and Britain descended into the calamitous 1976 IMF crisis in the wake of economic convulsions stimulated by the 1973 OPEC price rise.
Proposals for greater economic democracy lived on in the form of the ‘Alternative Economic Strategy’ advocated in the 1983 manifesto before going underground. They showed signs of resurfacing — in rather milder form — under Ed Miliband, whose talk of ‘predistribution’ and ‘responsible capitalism’ sought to make the case for the reshaping of the ‘rules of the game under which capitalism operates’ through ‘reforms to corporate governance, regulation to create new markets, and improvements in the way government procures goods within its existing budget.’
With Corbyn and McDonnell’s elevation to the leadership, the favourable reception of the 2017 manifesto, and the publication of Alternative Models of Ownership, the ideal of economic democracy has made an emphatic return to the innermost citadels of Labour policy formation.
Modes of economic democracy
The paper explores three means of introducing greater democracy into economic structures: the promotion of the cooperative model; the strengthening of the capacity of local communities to exert influence over the economic actors operating within their neighbourhoods; and the confident reassertion of the strategic importance of nationalised enterprises.
At the most fundamental level of economic production, the firm, the cooperative model offers the prospect of a more democratic and stable environment for workers, affording them a say in how an enterprise develops, greater leverage over their working conditions and more security in times of economic turbulence: during recessions many cooperatives are able to organise production to minimise the need for layoffs.
But Britain — the birthplace of the cooperative movement — has far fewer than many other developed countries. As of 2012 there were around 500 British worker co-ops with some 80,000 members, as contrasted with 20,000 co-ops in Spain, and some 800,000 co-op members in Italy.
Alternative Models of Ownership suggests that a principal reason is the comparative lack of financial support for British co-ops, which struggle to attract long term investment from commercial banks reluctant to lend to firms over which they have no control. By contrast Spain’s Mondragoncorporation, the world’s largest cooperative, has been supported throughout its history by a dedicated bank.
The Regional Investment Banks proposed in For the Many, Not the Few suggested one way forward, as did its recommendation for a British version of the Italian Marcora Law that makes available funds for worker buyouts, giving employees the right to be the buyer of first refusal when a company is put up for sale.
Moving beyond the structure of individual firms to those of regional economies, the paper suggests various ways in which local communities can channel the economic activity that takes place within them for the common good.
Strong ‘anchor institutions’, organisations with an important presence within a region, such as local authorities, NHS trusts, universities, trade unions, local businesses and housing associations, can use their power as purchasers, employers and economic incubators to ensure that private businesses operating within their orbit work for the collective benefit of the community.
Universities, for example, can offer research expertise for local businesses and support regional economies through student spending. And housing organisations and hospitals can use their purchasing power to root potentially footloose businesses within a locality.
State Owned Enterprises
The paper concludes by looking up to the economy’s ‘commanding heights’, making a forceful case for the critical role nationalised industries — which it refers to as State Owned Enterprises (SOEs) — can play in pursuing national strategic objectives such as the development of post-carbon energy infrastructures, the modernisation of transport networks and universal access to advanced communications:
These are areas where private capital, driven by short term profit and revenue maximisation, is inappropriate and unwilling without massive public subsidy. Given the ability of state owned corporations to borrow at much cheaper rates than the private sector, public ownership is the cheaper and more desirably long term option, ensuring also that revenues generated can be returned to the public purse.
SOEs have been a crucial factor in the rapid post-war reconstruction of many developed economies including France, Norway, Singapore, South Korea, and of course, most recently and dramatically, China. The paper argues that the global economy is now moving beyond the age of privatisation: the proportion of SOEs amongst the Fortune Global 500 grew from 9% in 2005 to 23% in 2015.
But if selective nationalisation is to work for the UK it is vital that historic issues with British public ownership be addressed. The ‘Morrisonian Model’ established by the Attlee government envisaged that public enterprises should be run much like private corporations, their operations entrusted to ‘captains of industry’ and technical experts. But if the fundamental purpose of taking an enterprise into public ownership is to ensure that it pursues objectives that extend beyond the realm of technical or commercial efficiency, a more democratic model of ownership is essential.
The paper highlights, by way of example, Norway’s state-owned oil exploration enterprise Statoil, which for decades has operated within a legislative framework specifying that the wealth flowing from oil extraction should be used to contribute to a ’qualitatively better society’. Statoil’s contribution to Norway’s Sovereign Wealth Fund illustrates the possibilities of channeling the activities of large enterprises for long-term collective benefit.
The paper’s emphasis on the strategic importance of SOEs surfaced, of course, in Labour’s manifesto pledge to take rail, energy and water back into public ownership, and to explore models for their governance beyond traditional top-down bureaucratic hierarchies.
A radical notion of efficiency
Alternative Models of Organisation will inspire some and alarm others. But whether it elicits delight or horror, it stands as a document of exceptional philosophical clarity, offering a bracing socialist diagnosis of and prescription for the British economy’s chronic dysfunction, proposing that short-termism, under-investment, flatlining productivity and regional and income inequalities are endemic characteristics of a free-wheeling capitalist system operating beyond the sphere of democratic oversight.
Moving beyond centre-left notions of redistribution the paper advocates a fundamental rewiring of the machinery of the capitalist economic system, concluding:
[Labour’s objective] should be nothing other than the creation of an economy which is fairer, more democratic, and more sustainable; that would overturn the hierarchies of power in our economy, placing those who create the real wealth in charge; that would end decades of under-investment and wasted potential by tearing down the vested interests that hold this country back … The historic name for that society is socialism, and this is Labour’s goal.
There were some indications during the election campaign that the leadership wants to move the party further along the road signposted by the paper. A shrewd New Socialist editorial, offering a deep analysis of the implications of Alternative Models of Ownership, observed a shift toward the language of the paper in Labour election broadcasts such as the #WeDemand video, with its bold claim that the nation’s collective economic activity should not be ‘subject to grand profiteering’ but ‘planned, transparent, executed in efficient fashion under democratic control using our intelligence and imagination’. The editorial notes:
A key change in the campaign and manifesto, one expressed in slightly different terms by Corbyn and McDonnell, is the centrality of a radical notion of efficiency, understood not as allocative efficiency determined by market mechanisms but as the economy’s ability to satisfy human needs. There is also, crucially, an effort to expand upon what counts as a human need. This notion of efficiency is notable in McDonnell’s conclusion to the ‘Labour stands with you’ broadcast — that ‘a fairer society is happier, more united, more efficient’ — and in Corbyn’s regular criticisms of the inefficiency of a society which wastes so many people’s talents.
A fuller working out of the philosophical trajectory of the paper in the next Labour manifesto depends on many unknowns, including the capacity of the Conservatives to stay in power and, of course, that of Labour’s current leadership.
But right now, with the Tories in crisis, and the tangible prospect of a reforming Labour government, Corbyn and McDonnell stand placed with a better opportunity to resume the project of economic democratisation that so electrified the party of the early 1970s than they could have ever thought possible.