A back of envelope sketched plan : a mutual solidarity micro pension for an emergent Democratic Economy
The suggestions below were written half in jest in response to a questioner sent out by the Ethical Consumer Their request were for ideas of what products they should pay attention to. The response below instead is an attempt to define a way of what might make the productive process more “ethical”. How might a micro pension work which is inclusive and practical, to support a beyond capitalist economy, in an age dominated by neo liberalism? What follows is an attempt at an answer.
Lessons can be learned from the mainly working class practice often inspired by non conformity in the C19. They formed their own self-help enterprises based on mutual aid and mutuality, these were based on democracy, one member one vote before the right to vote for parliamentary elections was conceded to all adults. They constructed their social enterprises by putting their pennies together in solidarity for the mutual benefit. This type of strategy is the basis of running friendly societies which provided welfare insurance before the welfare state, which itself was itself built upon these foundations. The pre condition of the modern welfare state was pioneered by autonomous self-help mutual action. The pioneering of autonomous social enterprises was well established as a cultural practice. Can this be recovered in a modern form so that communities and workers can begin taking the initiative to build enterprises that provide work and benefits relevant to current needs? Historic enterprise based on these principles are mutual societies, cooperatives and trade unions. All these are ways to create a democratic financial “field” which empower objectives of member participants. It is a way to underwrite the formation of a network of mutually supporting democratic enterprises committed to agreed principles.
A micro pension scheme as a secondary mutual enterprise can become a supporting hub to hold these relationships together. This can be a means of bringing democratic enterprises, (cooperatives) in a mutually supporting relationship which also includes supporters as investors and customers. This thickens and extends the cooperative relationship both between cooperatives, in all their forms, but also to their constituency of support such as investors and customers. For this to become viable and more extensive there needs to develop a “symmetry of benefits” for all stakeholders bound by democratic based governance. The relationship between stakeholders which can roughly defined as those between the factors of production, capital, labour, or land ( as environment) to be mediated though democratic governance so that each gets its appropriate dues. These, if these relationships are operative and alive, favour a culture of trust, supporting transparency, accountability, competent administration and membership engagement. A micro pension is a way, to build up sufficient socialized capital through voluntary association, to underwrite the beginning of a counter positional economy. What are the practical implications?
How can it be done? What effect might be expected? Are these viable as ideas and practice? There are examples of current established practices that show that micro pension schemes suggested might be doable. It would require that this as a form and practice became established as costume and establised practice. Currently charities are given and raise £13 billion, often with poor transparency, ambiguous aims and no democratic accountability. Despite a hostile political governmental policy verging on persecution trade unions retain over six million members sustained by voluntary contribution. The City dislike this residual empowerment field of workers autonomy which counter poses them. New options are needed which buildi a plurality of viable new economic forms as democratic enterprises that bring more inclusive benefits. But a weakness of trade unions are that they are limited in what they do, which in the main is defensive and reactive. They are generally do not directly initiate a counter positional economy. It is instructive to visit the Trade Union Certification web site and an examination of their annual accounts will illustrate the amounts a contribution system can raise. Trade Unions raise some £600 millions annually. A micro pension for democratic enterprises will take some mutual form such as an IPS cooperative or Bencom ( Community Benefit Company). it’s function would be to raise savings and buy holdings as Withdrawable shares in other cooperative enterprises or bonds. Some of the savings might be held back as side as loan funds for example to help make loan funds to bridge a shortfall when a community or cooperative share issue fall short.
A contribution system based on modest contributions will be more inclusive than the standard cooperative withdrawable community share issues, these usually require a minimum investment usually £500 in one payment. This is will tend to filler out people who cannot afford such payments at one go. Members contributions can also be topped up by larger one-off payments into their micro pension when they are able to do so. Members might be allowed to direct some or all of their micro investments into areas of social investment that they support. The assumption here is that mutual micro investor will save and have their investments committed (locked in) over a the span of their working lives but as a secondary pension to support the development of enterprises based on democratic economy. The risk is limited. It is inevitable that pioneering new cooperative enterprises entails some risk though this can be mitigated for with competent administration, with development of good products and services. A range of investments will spread risk. The administration of the micro pension will need to develop the skills to asses the quality of enterprises and be able to inform the membership and help guide areas of investment.
A simple model can give a rough illustration of what can happen given the assumptions implied by the model. It will need a build up of sufficient popular support to ” critical mass” the micro pension into viability within a medium term. Apart of critical mass of support the scheme needs an acceptance of a longterm perspective with patient investments, based on long-term saving, though some provision might be built-in for withdrawals to meet emergent needs. The intended expectation will be that most members will committed their stake until retirement when provision needs to made to allow the member to claim back their investment . The hoped for expectation is that the member would be able to withdraw the amount paid in, principle, plus accumulated interest/dividend. The aim would be to support a democratic economy that brought a symmetry of benefits to all stakeholders and that any surplus and benefits be shared equitably though a negotiated process. and directed by membership. All suggested here needs scrutiny and improvement but the aim here is to sketch a possible potential. It is a thought experiment, a hypothetical possibility, but only if the social and cultural conditions allow. A simple modal can illustrate what can happen.
An enterprise plan will include, raising start-up funds, this implies a group of people able and willing to get this going. Initial funds might be raised through crowd funding and some grants. In the USA Federal Credit Unions can only be chartered if they gather 2500 pledges of probable membership. Such a process a.t a lesser level might be prudent as a micro pension will need a minimal critical mass to become viable. This modal assumes that this is possible and that there will be year on year growth of membership. These assumptions are not too far-fetched as can be seen with the growth of the Ecology Building Society, Shared Interest, and some of the larger credit unions.
- This modal assumes no inflation.
2. An average membership over the first 10 years of 7500 members during the period. Paying on average £3 a week. (step 1, 10 years from start)
2.1 During the first 10 years each member invests an average of £200 as lump sum investments over and above their subscription payments. (10 years from start))
3. An average membership from the start of 15000 members after 20 years paying on average £3 per week subscription. (step 2, 20 years from start)
3.1 During the period from the start of the micro pension that on average members hold £300 as lump sum payments over and above their subscription.
4. An average return of 4.5% return on investments.
4.1 The distribution of the interest/dividend return to be distributed as following. 1.5% to investor.
1.5% to support administration and development costs, 1.5% to cover miscellaneous costs, such as bad debts and reserve build up.
5. That 5% of subscribed investment be put aside to cover administration costs. One off lump sum investments to be exempt (from this modal.
6. That 0.75% of miscellaneous cost are drawn upon to cover bad debts, while 0.75% is put into reserves. aside into a reserve fund.
First 10 years from start
Total in investment : Contributions £11,115,000 + lump sum investments £1,500,000= £12,615,000
+ total interest/ dividends £1,892,250 = total in investment funds £14,507,250,
Average investment per member = £1934.3
Average sum for administration per year : from 5% of contributions £63075 + 1.5% of interest/dividend £63075 * = total admin= £126150 (this *sum is based on 1.5% interest on accumulated total accumulated contributions (principle)
Reserve funds total after 10 years = £630750
First 20 years from start
Total in investments : Contributions £46,800,000 + lump sum investments £4,500,000 =
Total contributed investments (principle) = £51,300,000
Total investment funds plus interest £58,995,000
Average investment per member = £3933
Average sum for administration per year : £117,000 based on 5% of contributions + £769500 based on 1.5% of interest on accumulated investment as contributions.(principle)
Reserve funds total after 20 years = £7,695,5000 NB some of this reserves might be held as capital assets, as buildings and land for example a centre and a small farm.
This modal is a simple and crude modal and can only give an approximate sketch but hopefully is useful as an illustration of a hypothetical potential which can be in the realms of the possible given the right conditions, especially cultural. The averaged out figures obscure the variations over time but as crude as the modal is, it does point to possible development trends. As a social investment there may be opportunities for tax advantages. In addition having a self sufficient and viable organization might garner support from grants and state support. It would be important to maintain self sufficiency, autonomy and an innovative culture.
A Mutual Solidarity micro pension fund will act as democratically governed investment trust. It could invest in a host of cooperative enterprises. These could be such as land trusts, housing cooperatives, worker cooperative support funds, (and with a direct stake if worker cooperatives can be put into a multi stakeholder form), community energy companies, Phone Cooperative, Cooperative Energy, take a stake in the Cooperative Bank in partnership with the proposed customer union. There are a host of other potential enterprises, housing being a dire need especially for the younger generation as political solutions are liable to be inadequate to many people’s needs. This allows the pioneering of new pragmatic ways of helping others in a mutual way, getting some basic return but putting ones own resources to work in a way that others can share in the benefits.
There is scope to underwrite the development of an association of enterprises spread throughout the country based on clones or franchises of enterprise which are already established and have a strong public profile such as Suma and Essential food cooperatives. ( An example are the Arizmendi bakeries In the Bay area of California USA) . This may need a more pro active development modal which supports incubators that spin-off new enterprises bound by a democratic multistakeholder relationship. Should something like this take hold other schemes could be established to serve different geographical areas or interest. A mutual solidarity pension can begin to create a financial field conducive to supporting an emergent sector based on economic democracy and driven by direct agency, people doing it themselves and working this into practical solutions.
There are benefits to be gained by having a long term perspective . Care must be taken to keep such ventures democratically alive and corporate light.
Summary of possible benefits of a Mutual Solidarity Micro Pension. (MSMP)
Associative ways of fund building through modest contributions are well understood, these are potentially open to for the participation of the major of people.
Given competent adinistration and sound enterprises to invest in these can build up significant patient capital to underwrite democratic enterprises.
Democratic enterprises working as they should will build up community wealth as commons while aiming to distribute benefits monetary or otherwise in an equitable way, overseen by democratic governance.
Democratic enterprises will benefit by being dependant on a debt relationships which is internal to their culture and aims
A MSMP creates a financial field that supports mulitistakeholder relationships aiming to give mutual support and benefits to all parties.
A MSMP is a means of spreading risk.
A MSMP can be scaled up and replicated after a pioneer pilot stage and when political climate becomes benign.