Democratize This

Labour’s plans to pursue democratic models of ownership are the most radical aspect of Corbyn’s program.

Rohit Mattoo / Flickr

So much about the 2017 Labour election campaign has been heartening: the energy, the conviction, the full-throated embrace of remaking government in the service of the many.

All of the main campaign pledges — from free tuition to thousands of new homes to a stronger National Health Service — will change where money and resources flow in the UK, from those who need them least to those who need them most. But one set of proposals, if implemented, would go further, starting to transform the foundations of the economy.

A few months ago, a group of Labour Party researchers quietly delivered a report titled “Alternative Models of Ownership” to Shadow Chancellor John McDonnell. Its core message is simple: the Left must begin to democratize the economy.

An Abandoned Creed

And democratizing the economy means challenging the most important fundamental of capitalist economics: the primacy of private ownership. In particular, private ownership of capital, of all the things — the buildings, the machines, the tools, the hardware, and the software — that we use to make other things. Without a say in how tools are used, workers themselves become passive tools. Being able to actively participate in decision-making and ownership go hand in hand. Democratizing means taking ownership.

These ideas are not new, but they have been suppressed under the decades-long advance of right-wing ideas, including within traditionally left-wing parties and movements. In the UK, one of the last major proposals for democratizing the economy was the Lucas Alternative Corporate Plan. It was put forward by unionized workers at the Lucas Aerospace in 1976 in response to imminent restructuring that would see many of them fired.

The unions at Lucas canvassed their members and produced a detailed plan for an alternative kind of restructuring that would see the company transformed: from one with half of its output going to the military, to one producing socially useful products. Expanding on existing technology, workers proposed retooling to make everything from sorely needed kidney dialysis machines to early solar cells to hybrid power drives for vehicles.

Despite a global campaign, the Alternative Plan failed without adequate government pressure on Lucas. With the election of Margaret Thatcher a few short years later, the window on any similar push for economic transformation was shut.

“Alternative Models of Ownership” is one example of the window’s reopening. Many of the document’s ideas have subsequently found their way into the Labour Party election platform. The right-wing press has used it as evidence that Corbyn would “take Britain back to the ’70s.” But they’re wrong: the plans are firmly oriented to the future.

Why Take Control

The UK today is in a low-investment, low-productivity trap. And workers are feeling the brunt of it: long-run wage growth is hitting lows not seen since the nineteenth century. Inequality has grown steadily since the financial crisis. The economy, in short, is not working for most people.

“Alternative Models of Ownership” makes the case, rarely heard today, that we can tackle the roots of economic injustice and inequality, not just manage their effects. Democratizing ownership can move the UK economy away from the short-termism of the rich, who profit from unproductive, low-wage work. Socialists have always sought a high-productivity economy, where common ownership translates productivity gains into less work, more leisure, and a better life — as Corbyn says — for the many, not the few.

Instead of the usual fearmongering about robots taking jobs, the report argues that we can, and should, share in the benefits of automation and technological progress. Owned in common, technological advances of the future could free us of drudgery, rather than merely leave us unemployed and destitute.

And while it still makes too much of the dreaded automation, which has yet to show up in the productivity statistics, the document avoids uncritically repeating the wildest prognoses of imminent catastrophic unemployment. Democratic control over production, it says, is a goal regardless of whether robots are doing 20 percent, or one day 90 percent, of the work. Automation can be a threat or a promise depending on the structure of the economy:

The bigger immediate challenge is not the imminent rise of the robots but that too many people will remain trapped in robotic, drudgery-filled and low-productivity jobs. In this context, accelerating automation is a key political project. 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.

How to Take Control

So if more economic democracy is the end, Labour’s plans focus on three means of reaching it.

First, there are co-ops, membership organizations where ownership and decision-making are shared by the members. There are many types of co-ops, from consumer co-ops where members do nothing more than elect boards of governors every few years to fully worker-run co-ops where shop floor decisions are subject to democratic deliberation. At their best, co-ops ensure new technology is implemented quickly but work is redistributed so that jobs are not lost.

Unsurprisingly, the Labour document focuses on worker co-ops. It relies on three main examples — plywood processing in the US Northwest, the region of Emilia-Romagna in Italy, and the Mondragon network from Spain — to make the case that worker co-ops can be as efficient (if not more efficient) than their privately owned counterparts. This argument is key to presenting co-ops as a cure to the diagnosis of low productivity.

Next there is “municipal and locally-led” ownership. This broad category includes everything from community shops to farmers’ markets and development trusts to social enterprises. Many of these are halfway houses between capitalist enterprise and direct economic democracy. The important fact is that they are responsive to their communities, are limited, partially or totally, in using profits for anything other than reinvestment in the community, and have broader social or environmental goals.

Because of their generally small size and precarity as outcrops of democracy in rough capitalist seas, both co-ops and locally led institutions require other “anchor institutions” to sustain or protect them. For instance, co-ops have a harder time accessing finance because lenders cannot gain rights of control if things go wrong. Local social enterprises, on the other hand, often find it difficult to get off the ground without procurement contracts from local authorities for what they produce.

The third category of economic democracy, national ownership, is usually on a vastly different scale. Where co-ops or social enterprises are most often quite small, state-owned enterprises are usually found among the “commanding heights” of the economy.

Even conventional economics grudgingly admits that there may be “natural” monopolies, sectors where fixed capital costs are so high that any number of firms greater than one is too costly. The post service is one example: a network of post offices that serves the entire population is a very costly thing to create. Not only does it not make sense to have two; anyone trying to create a second one will most likely fail, consumed by the high start-up costs (unless, of course, the government goes out of its way to hamstring or dismantle these monopolies).

“Alternative Model of Ownership” argues for state ownership where natural monopolies exist, in sectors where only the government can carry out the long-term and risky investment that scares off private investors, and where high-quality services are needed. This third category is — rightly! — kept quite broad. Economic democracy is not a narrow niche.

While state-owned enterprises give the government direct control over such things as pricing and production, there are no guarantees that they will be significantly more democratic, neither for their workers nor the citizens who use their goods or services. Labour’s report holds out the promise for a different kind of state, one that recognizes public ownership is a means for more democracy, not an end in itself.

In a more democratic state, workers might elect front-line managers within a national railway company whose board included representatives from unions, passenger rights groups, and local government. Community councils of patients could help chart the strategy of a public hospital — an idea the NHS briefly flirted with in the 1970s. Economic democracy is far more than public ownership.

What to Control

Of the ideas within “Alternative Models of Ownership,” the one that figures most prominently in the Labour manifesto is nationalization. Or rather, renationalization. Corbyn has pledged to take crucial services such as rail and mail back under public ownership.

The privatization of the British railroads has been a textbook disaster: service has decreased, fares have skyrocketed, and ridership has dropped. The UK is a total laggard in the construction of high-speed rail — precisely the type of high-cost, high-risk endeavor with huge social and ecological benefits that is largely undertaken by state-run rail companies elsewhere.

The Royal Mail has seen some of the same dynamics in service quality and cost since becoming a for-profit business. Labour has committed to taking both back into public hands step by step: taking over rail companies as their franchises expire and reversing Royal Mail privatization.

A third major sector of the UK economy that’s gone from public into private hands is power generation and distribution. Unlike the cases of rail and mail, the pledge to bring the energy system back under public ownership draws on the second plank of “Alternative Models of Ownership”: Labour has said it will create a decentralized system where a single nationally owned grid is framed by a network of new municipally owned energy providers. The plan is to create new municipal entities alongside existing private providers, outcompeting and eventually replacing them with a combination of lower costs, better service, and mandated green power.

Moving the Debate Forward

John McDonnell has also spoken regularly about expanding co-ops, especially in cases where companies are failing and workers risk being laid off. Additionally, McDonnell has spoken of the “Right to Own,” a key proposal of Alternative Models of Ownership, which McDonnell says would give workers “first rights on buying out a company or plant that is being dissolved, sold, or floated on the stock exchange.” Labour is right to include co-ops as a potential source of economic democracy but its report isn’t as critical as it should be. In the first instance, there are times when businesses are struggling for good reason, whether due to technological obsolescence, a change in fashion or some other cause. Funds should then be directed not just to taking over the firms but to reorienting them.

This is what the precursors to Labour’s current policy at Lucas Aerospace wanted — and it is a much bigger project, one that may require far more than just buy-out funds: retraining, technical expertise, retooling, perhaps at least temporary nationalization to obtain funding.

More broadly, co-ops under capitalism often end up adopting capitalist business practices, even against the best wishes of their members. Wage disparities, an increasingly professionalized cadre of managers, arbitrary shop floor discipline — all of these are symptoms that have come to plague long-standing co-ops, for example ones in the Mondragon network. Others, such as those in the US plywood industry, have slowly died as the industry transformed.

There is nothing inherently good about small scale. It can, sometimes, root producers in communities and create some semblance of democratic ownership. But it can also generate inefficiencies, smaller cushions for risk, and provincialism — more parochial management or a lack of innovation.

Starting small may be easier, but ultimately more control over economic decision-making means more control over investment across the economy. Democratic planning has always been dogged by the question of directing investment. Alongside local experiments, we must be thinking about the heights of the global economy, the heart of our modern capitalist planning apparatus: the financial system. That it is missing from “Alternative Models of Ownership” shows the long road to more wholesale transformation.

In some sectors, economic democracy will be easier at the local level, in others larger entities will be more stable and resilient. There is an old left argument that capitalism creates its own conditions for being surpassed. Today’s enormous corporations pay poverty wages, despoil the environment, and are run as personal fiefdoms. But they also increase technical productivity and bring masses of people together, revealing the unquestionably social nature of work.

Despite the myth of meritocracy, workers in today’s global supply chains and massive service operations can see immediately that no one person, no Sam Walton, no Richard Branson, is responsible for making them run. We are bound together by a grand machinery. Under capitalism, the machinery distributes its growing bounty unequally, destroying human lives and nature in the process.

“Alternative Models of Ownership” returns to a key demand of the Left, one posed since the nineteenth century: that we take over the machinery and fundamentally retool it — that we take a private system of production and transform it into a social organism under democratic control.

Doing so requires steeling ourselves for a big fight. The report offers many proposals for democratic end goals, but we must also devise strategies for the inevitable struggles to achieve them. We cannot fall into a technocratic trap. Nationalizing industries or instituting municipal control are not neutral proposals but class demands. Labour’s surge in the polls and its fantastic campaign are a start – but we need a long-term focus on building the power that will be capable of making these ideas reality.

“Alternative Models of Ownership” is a real step forward, reviving the demand for economic transformation. It is an ambitious document and, undoubtedly, one of the most radical we have seen in mainstream politics for a long time. Jeremy Corbyn’s Labour is proposing not just that we have a bigger slice of the pie, but a bigger say over how it is made.