Are Mutuals the Road to Privatization or Economic Democracy, perhaps with help from the unions?

Abstract:       Government ministers have recently said that they want to hive off some of the civil service into a hybrid, private, “mutual”, and public enterprise.  They propose to start with the “Nudge” unit. Their motives seem ambiguous. Trade Unions, with cooperatives and mutuals have similar roots but because of diverging functions have not always worked compatably. In the USA unions are in severe decline but recently some have began to explore the possibility of working with cooperative and mutual enterprises as a way of job creation.  Unions are in an ideal position to identify employment needs and have knowledge of  their members skills, but can unions in the US and UK be brought into compatibility and support the formation of democratic enterprises such as mutuals and cooperatives?  Theycan help strengthen democratic economy  and help to define it, in the independent  and public sectors.  In the past the common people of the UK created a host of self-help enterprises which empowered them and paved the way to the welfare state. This was an autonomous culture of the common people who owned their own social solutions based on equitable and democratic principles, this has all but died out.  Instead the initiative has all too often been taken over  by self selecting paternalistic agencies.    Increasingly corporate capitalist agencies are intruding.  Can the ability to self generate autonomous democratic enterprises be recovered?   What cooperatives and mutuals are can be a contested field which can be intruded by dubious agendas such as  New mutualism and Big Society, these sometimes may be  at variance to the social and democratic character of traditional cooperatives by bringing in a Janus faced triangulation which compromise cooperative principles.  Are they being used as a means to privatize?   If so can the agenda be turned around.? Trade Unions and those that support democratic enterprises might help rescue cooperatives and mutuals as a means of developing enterprises that lead to more equitable, social and ecological ends, and that belong to the citizens through membership. This if succesful may inform new political developments. 

NB. In the UK  the governing bodies of mutual enterprises are elected ; as they also are for Credit Unions internationally.

Owen Jones in his book “Chaves” points out that the right by promoting cooperatives and mutual solutions, have stolen cloths  from the left,  what would historically have been associated with a type of socialism.  The current government in regard to the public sector is fishing in these waters and at best their agenda seems ambiguous.  Cooperatives , trade unions often grew out of  mutual friendly societies.  In their radical and militant forms in the 1820s to 40s they were sometimes utopian, but it was out of this ferment of mainly working class activity that the Rochdale Pioneer’s established a working model which was sufficiently viable to gradually be repeatable. The Cooperative shop was to be a  component of a more ambitious cooperative commonwealth, then usually conceived as cooperative communities, which were set up but failed.  Cooperatives will usually have some social objective but they need to work.  There is some ambiguity now around the term cooperative and mutual, are they just a device to park some people with problems in a capitalist dominated market;  are they potentially  a trojan horse to privatization or do they have any transformational potential to an economy which makes wealth, work and housing, extra,  more democratic and  equitable?  Equitable means a more equal spread of wealth and  power. Is this process quietly beginning to revive, as some suggest?

The opposition to corporate and financial capitalism seems to be growing in the USA especially among the young.   The the USA remains a rich country were inequality is growing. Wages have decreased as a portion of GDP while profits have raised.  Inequality, general educational attainment for the low to middle-income people results are poor and given the very expensive public/private health system they have, which is 80% more expensive than the in the UK, the outcomes are equivalent, while not giving universal cover,  up to fifty million people have no health cover. Unemployment and under employment is understated, teenage pregnancies are high,  they have up to two million people locked  up in prisons. Having said this the US fits the cliche of the good , the bad and the ugly.  There are terrible things happening while at the same time in other places there are interesting benevolent developments.    Some progressive radicals  there seem to be working on finding ways of making the economy more democratic in regard to community wealth and fairer distribution of income.

The Evergreen Cooperatives in Cleveland Ohio have set up three worker cooperatives around a  cooperative development body with a revolving fund . These work with local publicly funded anchor institutions such as the local hospital and university which guarantee to  purchase  services and products.  This initiative has grown as an attempt to address the severe economic problems of Cleveland, which has suffered through catastrophic de- industrialization leading to the halving of the population,  with many of the remaining population suffering chronic poverty and unemployment.  They plan to set up two more new worker cooperatives this year.  These cooperatives are contextualized in a mutual self-supporting community association in partnership with local government.   The Mondragon cooperatives from the Basque country have been a model but adapted to local conditions.

  The Mondragon influence has recently become more direct.  In the last year the United Steel Workers Union in partnership with the Mondragon Cooperatives and the Ohio  Job Centre have come out with the Union Cooperative Model which is an attempt to reconcile the function of the unions with that of a workers cooperatives.  It seems that the union aims to take on the role of a social council, which is an important component of the federative complex of  the Mondragon Cooperative Corporation, these set the objectives and norms of the  associated cooperatives.   There are pilot union cooperatives being developed in Cincinnati but it is too early to know how these will work out.

 American culture seems to be very individualistic and this influence has spread  abroad.  Enterprises based on democracy ,  which usually means some form of mutual or cooperative require culture of mutuality and solidarity , with some collective aspect, which both distributes wealth equitably to individuals while retaining and building up democratic commonwealth as a  benign collectivism.  A growing number of Americans seem to have had a belly full of the nasty effects of  neo-liberal economics and are questioning the delusions of its dogma. It would be a delicious irony if an effective counter-positional process leading to a “beyond capitalism” where to come from the USA; a joke of history!  

 Unions and cooperatives have similar historical roots but have diverged as a result of conflicting interests due to their functions .  In the USA unions have seriously declined and their influence is weakened. They  are under pressure to redefine their roles, this is may be inclining them to return to a proactive action, such as helping develop  democratic enterprises for  communities and workers.  This will need  the reconciliation of the differing functions which the imperatives of being in a market dominated economy predispose unions, cooperatives or mutuals into.  If these difficulties are be overcome, mutuals, cooperative and trade unions need to reconnect with their members and also a wider public.  These organisations are often too corporate and bureaucratic with low membership participation.  If they are to be democratically alive work has to be done to re-engage with members, modern internet communications might help.  What has happened in the USA may be happening in the UK.  Unions, cooperatives and mutuals perhaps need to re invent themselves.   Many of these organizations are conservative, sometimes dominated  by  functionaries.  But are the Unions in particular, in the position of the proverbial frog in the pot of slowly warming water where they will be boiled alive if they do not jump?  Might they not benefit from going beyond their traditional functions and add  some counter-positional  agenda by promoting worker owned jobs based on economic democracy?  The Unite  Union which is a sister union to the Untied Steel Workers (USA) may have taken a small step in this direction. They have set up community branches to serve the unemployed and  have talked of establishing relationships with credit unions to provide reasonably priced credit for members.  Unions  might help direct cooperatives to delivering solutions for economically depressed areas and are well placed serving a more working class perspective which is needed.

 There are obstacles to be overcome before unions are inclined to see  cooperatives and mutual enterprises as possible benign providers of work. There is the fear is that government policy is using them as vehicles to run down the public sector, weakening job security  and with the possibility of  becoming a halfway to privatization.  In the non state  sector cooperatives sometimes need some self-sacrifice especially in the early stages to establish them, what is called sweat capital. This can be minimized if they are established with backing, sufficient funds and are fully skilled up.  No cooperative can exist in  the long-term on sweat alone but in the initial phases this might be a necessity, which might conflict with the objectives of a union.  Union cultures  may be too fixed for them to be able widen their objectives from a defensive  role to that of a proactive one.  In the absence of such influences others will be willing to move in.

Unions are important social assets which have been vilified and  weakened,  undermining their ability to be a check on the powers of financial and corporate power. Unions had significant negative power but  today despite  failures, corporate and financial capitalism  dominates nearly unchecked, both in its ability to set the main agenda  but in its negative powers of withdrawing capital when it suits the them. The corporations of the UK are sitting on £700 billion capital funds and are in effect on strike.   A recovery of the ability, of what working people did in the nineteenth century, of making their own social and economic  enterprises would be a step to begin developing new solutions based on economic democracy.  The public might find this attractive. Unions, mutuals and cooperative need to rediscover  that they belong historically to the same family, and potentially can work for compatible ends. These organizational forms are based on cooperation, mutuality and solidarity which apart from implying  fairness and democracy as principles, have at their best also practical applications.  Both these aspects have to be alive with in their culture and structure.   Together they can help set an agenda which extends democracy into the economy both in the independent and public sector, and head off the intrusion of corporate capitalism into the public sector,  for now they are hovering around, muddying the waters. 

Ed Mayo of Cooperative UK has recently written for the Guardian and a letter in the Independent which illustrates the problem .  The mainstream of cooperatives are bound by international agreement to a set of basic principles. Cooperatives and mutuals are often lumped into the confusing category of the third sector, which lumps in charities trade unions, housing associations, b corporations together. There are a spectrum of variations classed as cooperatives and mutuals from corporate coops to coops with narrow idealistic agendas. The proposed hybrid enterprise by Francis Maude recently announced , seems to have a public interest, a quarter staff ownership  and the rest owned by private sector business.  The staff have no democratic powers and may have this farrago imposed on them. The usual justification is that investment and management from the capitalist corporate sector can be brought in.  Business babble and management speak is tainted with an ideology which does not always go well with the light ideology implied  by cooperative principles and practice.  The intrusion of  corporate capitalism into the public sector, which usually delivers social goods, is corrupting and also violates the principal of separation of powers and functions, a basic principle of  good practice in governance  This corrupts of government by  embedding  vested interests.  The capitalist sector is now integrated into public sector but their main purpose is to maximize share value and all too often huge salaries . They  use  armies of professional lobbyist to influence parliament and government.  Capitalist involvement with mutuals and cooperatives will corrupt their democratic character. Already  B Corporations and housing associations are often sold as social enterprises, another term that needs clearer definition. These organisations are based on  managed professional  management functionaries with no or poor  stakeholder accountability.  These as democratic enterprises should be servants of the members, with their governance  requiring  feedback,scrutiny and mandates  from the membership. Many are in need of meaningful democratic accountability to validate them as  social enterprises

In modern times social goods and enterprises are delivered by paternalistic ethos, things done for people by professional coteries, in the public sector by social bureaucracy and from the corporate capitalist sector by business entrepreneurs .   In the nineteenth century when the options for people with modest means was to be sent to a harsh workhouse on the parish, the common people, when they could, put their pennies together and formed their own self-help organizations and enterprises. Among these are trade unions, credit unions, working mens clubs, mutual insurance, medical aid societies, building societies, friendly societies and consumer and producer cooperatives. Despite poverty the common people were able to create their own solutions, their own self-governing enterprises based on one person one vote at a time when most of the adult population did not have the vote. This built up a culture of implied community democratic proto-socialism as practice. This influenced the development of what was called municipal socialism from in 1880s to the 1930,  an era when local democracy was vital and real. In the last 70 years municipal government has been severely weakened.  These autonomous developments were the pre-history of what would eventually develop into the welfare state. They pioneered social insurance in all it forms and established these as necessary norms in a modern society,  In themselves they were not sufficient and did not have the capacity to give universal cover and eventually the state became the main means of delivering social goods.

Beveridge , who was very influential in the setting up the modern welfare state after 1945 was keen that independent mutual organisations would continue to play a significant role.  But the dominant influence after the war favored  state centralism. There were two effects that drove this, people had been habituated through the war effort into accepting the necessity of running affairs in this way, and  this reenforced a tendency which was already in ascendency in radical circles,   so-called “democratic” centralism.  In Britain this influence, as already mentioned in previous blogs was, was exemplified by the views of Sydney and  Beatrice Webb. These two were very effective researchers and propagandists. Their Minority Report on the Poor Law of 1909 was an influence on Beverage. The Webbs, e supported consumer cooperatives, but were hostile to workers control, industrial democracy and worker cooperatives.  Their idea was that the administration of social goods and social industries should be done by a technocratic elites run by the state overseen by Parliament.  This of course fits well with the very hierarchical structure of our government and civil service where the attitude is that things be  done on behalf of a population who are assumed  in the majority, not capable to decide  for themselves. Beveridge though been influenced by the Minority Report retained the hope that the autonomous element would survive.

When the modern welfare state was set up after the war many workers from the friendly societies were co-opted to help.  The people were receptive and appreciative of the new welfare state, for them it was the extension of what friendly societies and municipalities had done but on a larger scale, with more capacity and cover.  This ethos is caught and implied in Ken Loaches documentary “The Spirit of 1945”. The issues then were much clearer and people seem to have felt a sense of ownership and a deep appreciation of what the welfare state meant.  One important factor to note was that it was assumed that the government had a duty to try to maintain full employment to underwrite this new settlement.   But the welfare state and nationalization that happened at the time was  paternalistic and top down. Since then and with hostile propaganda ,  people’s sense of ownership  of the public sector has weakened. This in part a consequence of the way it was set up.

Before the first world war unions sometimes campaigned for industrial democracy.  The then novel but rudimentary state insurance, such as the unemployment pay, was usually run by  democratic associational means, such as by trade unions.  The cooperatives, friendly societies, most trade unions and various mutuals were created by a population with practical needs, sometimes inspired by the autonomous self-help  ethos of movements such as primitive Methodism.  At the end of the nineteenth century  Britain was a hub of an empire but at the same time a large portion of the population lived  stressed lives  on low wages. This triggered an upsurge of militancy in the form of syndicalism, and a hope of establishing a workers controlled federated co-operative commonwealth became again a living issue. This was a resurgence of  Robert Owens inspired ideas  that sprung fleetingly in existence 1834 as the Grand National Consolidated Trade Union. Their hope was that  the working class could declare  a great national holiday which would last until  the collapsing  economy allowed  workers  on a set day to returned to work under the new organization of Grand National Consolidated Trade Union, as a federative cooperative commonwealth.  The scheme collapsed but the idea of general strikes as a revolutionary method survived as a secular millenarian aspiration.  Guild Socialism was a more sophisticated variation of these ideas and was developed in the writings of G D H Cole, as democratic  governance  in the workplace and for the consumer as cooperatives. ( see Guild Socialism on Blogroll)  .

 After the Russian revolution this influence declined and by the end of the second world war became  residual. However it did occasionally manifest itself in more modest forms and in unexpected places such as Francoist Spain, with the emergence of the Mondragon Coops in the Basque country which had been devastated by the civil war.. In the UK this current manifest itself through the work of ICOM ( Industrial Common Ownership Movement) and the new wave of worker coops emerging in the 1950  – 70s.  The consumer cooperative quietly continued though slowly declined and it seems today their future is in the balance.  The relationship between trade unions and economic democracy evaporated and unions became solely a means of improving conditions of  work for wage earners.  They relied on being supplicants to displaced agencies, such as Government and employers.  Though there was also some marginal interest in co-determination in the mid 1970, the Bullock report was the result( see blog roll).  At the  same time the Institute for Workers Control was also active.

In 1979 the era of neo-liberalism started and from that point the idea of workers democracy at work in its various forms has all but gone off any agenda in the Uk though there are signs of new interest.  Ambiguity  arose in the place of any clear agenda,  for making the economy more democratic.  Instead there has been a tendency to   spiritualize of economic issues combined with  over emphasis on smallness and localism. These notions have their place and point to humanizing the economy but can unwittingly lead to small egotistic enterprises with insufficient potential.  Not all problems can be solved on a small-scale for the needs of people and the environment sometimes need larger effects.  Subsidiarity as principle and practice remains an important issue,  implying  keeping decisions at the most local and smallest scale that is practical, this points to  federal structures of governance .  The bulk of what is classified as cooperative and mutual are an amalgamation such as the Cooperative Group or surviving mutual building societies, these are usually very corporate,  only nominally democratic. From the limited information, the impression  is that a lot of new cooperatives are economically marginal, many grant dependent.  Vibrant, innovative and financial succesful  cooperatives are thin on the ground though there seem to a few vibrant examples..  It is too early to say if the new wave of community energy projects can make a significant contribution. In contrast the Mondragon cooperatives have their own university working on research into areas for new enterprises. These are developed and supported within  a federative association. 

 Co-ownership is another option and is sometimes  compatible with economic democracy . Some are just employee share owning schemes, though these can be made democratic.    There are some very succesful firms that work on this basis but with ownership in trust with some democratic governance, such as John Lewis, however this seems to be pushed as an instrumental ownership option and only weakly conforms as part of a movement for economic democracy.

In recent times the so-called Big Society agenda has been pushed as a farrago of ideas.  The motivation seems to be the shrinking of the state, meaning bringing down the percentage of state expenditure as a percentage of GDP. The result will be that  the stabilizing and equalizing functions of the state will be weakened.  The claim is that this needs to be brought down to 30% of GBP.  But a settlement that reduces human interactions to commodities to be traded in the market will throw out contradictions, with destructive effects.  The state sector was established to mitigate these and the private sector is inadequate  as a means of delivering of social goods, as the profit motive conflicts with such aims and were profit cannot be made they absent. The neo- liberals answer is to co-opt  solutions developed  in the nineteenth century as mutual self-help  and cooperation as a means of  a cheaper option and where cost are loaded onto the voluntary sector , a mixture of charities, mutuals and private sector In addition they push an agenda that conflate private capital with mutualism so compromising the democratic nature of social enterprises. Capital seeks to colonize any space were profits can be extracted and will undo social relationships if allowed to, so reducing  human relationships to commercial transactions. An  illustration is  Andrew Regan attempt to  de- mutualize the then declining Cooperative Retail Society  in the mid 1990s with the help of treacherous cooperative functionaries.  A city commentator of the Murdock owned Sunday Times expressed with relish  the prospect of seeing assets of the CRS, a cooperative commonwealth, put together by thousands of members over a century or more, into “play” on the financial markets. In saying this the corporate cooperatives if they are to revive need to recover their democratic nature, reconnect with their members and at the same time  be effective. 

Another agenda is possible but it needs significant support from people who are determined to work towards developing democratic enterprises that engage their membership, be they workers, the community, tenants or consumers. Democratic enterprises can be independent in the market.  They also can act as at the interface of market and public sector. They can sometimes go into partnership with progressive  private sector businesses, that respect economic democracy.  There is also the potential option that innovative trade unions  support such developments and help  steer the agenda into an equitable but pragmatic direction  serving sections of the people whose problems need attention.  Mutual and cooperatives can be used in several ways but in the end they are what people do with them .  These enterprise forms can be used as a means  to  fuller democracy  in the economy if enough people work at it.


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