You can't control what you don't own

If there's one lesson of the banking crisis and bailouts of 2007-09, it's that 'you can't control what you don't own'.

Today the government implores the banks to lend more to businesses and to constrain executive bonuses, but to little avail. Perhaps the irony is that we do still own large stakes in several banks. Indeed if it were not for the various guarantee schemes that underpinned UK banking, we would have ended up owning most of them as they fell like dominoes. However, the ownership model devised was arms-length, temporary, and was in reality the privatisation of public money rather than the nationalisation of private assets (or liabilities).

The New Labour government had introduced the market further into areas such as welfare, education and health, had part-privatised the London Underground, and more of the civil service than the governments of Thatcher and Major combined. But here it was facing the possibility that its golden child - the finance sector - was about to collapse.

In 2007, what struck LEAP was the lack of debate about public ownership. What really sent the message home clearly for me was this press release from Unite, the union that represents Northern Rock staff, from 20 November 2007. It sets out a six point 'Charter for Northern Rock' the sixth point is "To retain Northern Rock as a UK listed company".

I don't use this example to in anyway demean Unite, but simply to highlight how little issues of ownership and control were being discussed and debated in the labour movement.


Today, Southern Cross - which owns 753 care homes across the UK - remains on the verge of collapse. The 2011 GMB Congress asked 'If private equity and the private sector are places fit for the care of our elderly, our most vulnerable and our most dependant?' Indeed.

A new debate is starting up about media ownership in the wake of the News of the World hacking scandal. With energy and supermarket prices both rising above inflation to enable gratuitous profiteering, the demand for public ownership should be made.

Earlier this week it was also revealed that Virgin Trains received £40 million in public subsidy, and paid out nearly £35 million in dividends. The case for rail re-nationalisation is overwhelming.

It therefore seems an opportune time to publish free online for the first time LEAP's 2008 publication Building the new common sense: Social ownership for the 21st century (you can buy a hard copy here).

The pamphlet looks at different forms of public ownership from the Morrisonian post-war model to workers' co-operatives.

Download chapter by chapter

• Preface by Andrew Fisher
• The Case for Industrial and Economic Democracy by Gregor Gall
• Why we need a culture of social ownership by Rosamund Stock
• The economic case for worker-owned co-operatives by Jerry Jones
• Telecommunications of the future under public ownership by Maria Exall & Gary Heather
• Rail privatisation - a failed experiment by Bob Crow
• The Growing Case for Social Ownership by Gerry Gold
• The Campaign for Social Ownership in the 21st century by John McDonnell MP

Hutton and the government: wrong and unfair on public sector pensions

Full text below of letter printed in today's Guardian


As economists we are opposed to the public sector pension reforms proposed by this government and Lord Hutton.

Public sector pensions are far more efficient than private pensions. The net cost of paying public sector pensions in 2009/10 was a little under £4 billion. The cost of providing tax relief to the one per cent of those earning more than £150,000 is more than twice as much. The total cost of providing tax relief to all higher rate taxpayers, on their private pensions, is more than five times as much.

By changing pension calculations from the RPI measure of inflation to CPI, pensioners (in all sectors) will be made hundreds of pounds worse off, with the loss accumulating as pensioners get older. The vast majority of economists and statisticians recognise that RPI is a more accurate inflation measure.

Taken as a whole these changes are a substantial disincentive to save because they will encourage people, already burdened by student debt, high housing costs, and the need to save when the social security safety net is being withdrawn, to leave public sector pension schemes and abandon provision for their old age altogether. This contradicts Iain Duncan Smith’s words earlier this week about rewarding saving. If public sector workers opt out of their schemes because of rising costs, it could leave some schemes in jeopardy.

The government claims these changes will help reduce the deficit, but they will take money out of the pay packets of today’s workers and from tomorrow’s pensioners, suppressing demand and damaging any prospect of recovery, as well as increasing pensioner poverty.

On public sector pensions, as on so much else, the government has got it wrong.

Richard Murphy, Tax Research LLP
Andrew Fisher, LEAP
Howard Reed, Landman Economics
Dr Stephanie Blankenburg, SOAS
Professor Prem Sikka, University of Essex
John Christensen, Tax Justice Network
Professor Gregor Gall, University of Hertfordshire
Colin Hines, Green New Deal Group
Bryn Davies, Union Pension Services

Money in your pocket? Think again

Gregor Gall


Leading US sociologist Michael Burawoy coined a good phrase many years ago. "The anarchy of the market leads to despotism in the factory."

What he meant by anarchy of the market was two things.

First, capitalism is an unco-ordinated and competitive fight between different capitalists to make profits. At any one point in time many capitalists are chasing the same market and would almost never countenance working together because that would mean having to share the spoils.

Second, over time the level of activity in the marketplace goes up and down depending on things like the confidence of the capitalists in the state of the economy and their willingness to invest.

Put both together and you have a recipe for economic and social instability.

What he meant by despotism in the factory was that these two things result in employers establishing regimes in the workplace by which try to exploit workers as much as possible.

Their goal is not simply to produce surplus value that can then be realised in the marketplace. It necessarily means creating regimes for controlling workers, whether through the iron fist or velvet glove.

But when it comes down to it the immediate goal of the capitalists is often to use workers as shock absorbers in this process.

Changes in the marketplace such as increasing competition or a slump in demand are likely to drive down a capitalist's profits. The best protection for them against these threats to their interests is to increase the level of exploitation of workers.

This leads to the tyranny of pay cuts, speed-ups, increased working hours and the like. Attacks on union activists and union organisation are part and parcel of this because collective organisation stands in the way of workers being shock absorbers.

When you think about it, a capitalist is individually able to control the costs of its labour in a way that they can't control the costs of raw materials, transport and exchange rates. The same is true when it comes to demand for a capitalist's good or services.

The pounds and pence of workers' wages can be varied by an employer, as can the number of workers that he or she employs.

By reducing the costs of the labour he or she employs relative to their productivity and efficiency, a capitalist can lower the price of their goods or services if need be while maintaining or even increasing the surplus value created. This is the surest way to be able to realise the value of the surplus - that is, to turn it into profit by selling it in the marketplace.

This ABC of capitalist economics is unfortunately not well understood. Many of the readers of the Morning Star will, like me, also buy The Big Issue. It is quite rightly seen by many as a progressive project for the homeless.

It uses the phrase "a help up not a handout" because the vendors have to go out and sell the magazine to the public. This helps them regain their motivation and self-respect. But every week without fail page three of The Big Issue shows it has no basic grasp of how economics works under capitalism.

On this page it states that "Vendors buy the magazine for 85p and sell it for £1.70, making a 85p profit on each copy."

Vendors do no such thing unless you think that there's no way you can calculate the cost of their labour - the time they spend standing there selling the magazine, which involves being out in all weathers for many hours and making sales pitches and chit-chat to customers.

Selling the magazine for £1.70 gives them 85p revenue per copy. But if you deduct anything like the minimum wage - currently £5.80 per hour for an adult over 21 - then it is clear that any "profit" they make is far less than 85p per sold copy.

And there must be days towards the end of the week when they sell many less than in the first few days of the new issue. This would see any notional hourly pay rate decline sharply.

The Big Issue confuses profit with income, ignoring the act of labouring.

What this means is that socialists have a mountain to climb in getting the wider populace to understand how, why and where capitalists steal labour from workers in order to make profits for themselves - and themselves only.

One way of countering this is to provide basic socialist and Marxist education through trade unions.

Another is to get our teachers to cover this approach to economics as part of the curriculum that children get taught at school.

One of the best, though, is simply to read The Ragged Trousered Philanthropists by Robert Tressell.

Gregor Gall is professor of industrial relations at the University of Hertfordshire g.gall@herts.ac.uk

• This article first appeared in the Morning Star
  

Workers take back rights at Lindsey

While Parliament has blocked previous attempts - led by John McDonnell MP - to unpick Thatcher's anti-trade union laws, workers at Lindsey and those taking solidarity action are tearing up the laws on the ground.

The right to work, and therefore the right to income, is a key economic right. Total may think it can walk all over its workforce, but the Lindsey workers and their supporters are proving where the real power lies if people act together in unity.

John McDonnell MP,LEAP Chair, said:

"We fully support the Lindsey workers who have taken strike action today and urge others to come out in support of those workers.

"We are calling on the employers to immediately come to the negotiating table to seek a just resolution of this dispute.

"The courage of the Lindsey workers has demonstrated that trade unionists are no longer willing to accept the anti-trade union laws. The Government should act now to scrap these laws which deny the basic right to strike."

There's also been excellent coverage in the Morning Star, by Professor Gregor Gall on Commment is Free, and on the A World to Win website.

Update 23/06: John McDonnell MP has tabled EDM 1718 'Lindsey Oil Refinery Industrial Action' calling on Total to negotiate with the GMB and Unite unions

And there's a new piece on Comment is Free by Gregor Gall

Capitalism Isn't Working - Building the New Common Sense

Building the New Common Sense – Social Ownership for the 21st Century is the pamphlet published by LEAP last September. Thanks to many LEAP supporters we have sold enough copies to break even. Unlike the capitalist banks, we break even, haven't relied on dodgy loans or Government bailouts and are reinvesting the (very) small surplus in our forthcoming conference.

In the preface to Building the New Common Sense, I wrote:

"This pamphlet is the start of a debate and of a campaign to put the question of ownership back on the industrial and political agenda. As the UK faces recession and as job losses and business failures continue to rise, this question could not be more timely."

In the concluding contribution to the pamphlet, John McDonnell MP, LEAP Chair, wrote:

"Now is the time . . . to reinvigorate a debate about a new role for social ownership in the 21st century. This pamphlet is designed to stimulate a debate among trade unionists and all those who want a stake in their community. From this debate, we need to take forward a campaign for a worker controlled economy, accountable to our communities, into our union branches and conferences, into our workplaces, and through the TUC, and eventually even Parliament."

Since then workers have occupied workplaces at Waterford Crystal and currently at Visteon. We are hoping to have a worker from the Visteon occupation at the LEAP conference 'Capitalism Isn't Working' which takes place next Saturday, 25th April. The conference will also include a workshop entitled 'Resisting the Recession: the industrial agenda' led by Professor Gregor Gall and Jerry Jones (both contributors to Building the New Common Sense).

If you are interested in continuing the debate and building a campaign for workers' control and in solidarity with those workers taking action, I hope you will attend and participate in the conference.

Nationalisation - in whose interest?

Gregor Gall
(A version of this article first appeared in the Morning Star)

State intervention and nationalisation are both back with an incredible bang. Suddenly, TINA – there is no alternative – to the free market looks as hollow as Brown's promise to end the cycle of boom and bust. Indeed, state intervention has been used to back up the so-called free market. Taxpayers', not private, money has been ploughed into doing this.

It just goes to show that in this age of globalisation and neo-liberalism the state and market regulation are still very important to capitalism, particularly when it is facing financial and economic meltdown.

The downright annoying aspect is that the bailouts we've seen here and in the United States are nationalisations by the right and for the bosses. If they were carried out at the behest of the left and for the workers, taxpayers and citizens, they would look entirely different.

So sure the senior management was changed when Northern Rock was nationalised but one set of capitalist managers was replaced by another set. The same will be true of Bradford and Bingley. The nationalisations were not to safeguard jobs or workers' conditions or people's savings but the financial system in Britain upon which capitalism and profits heavily depend.

If the left is to make headway right now, we must start getting our ideas about public and social ownership out into the media, into union members' heads and onto people's radar screens.

We need to start off with what public and social ownership are not. We're not calling for a return to the age of nationalisation, where civil servants ran the industries in undemocratic and unaccountable ways. Jobs were not safeguarded and services were often poor. We're also not calling for a situation of a command economy where the centre dictated what was produced without consulting the consumers and the localities.

The lessons we've learnt are that whilst coordination and planning are needed, we should have decentralised structures that allow participation and that the process is one of bottom up democracy not top down diktat.

One model of social ownership, for say, public transport (buses, railways, ferries) would be that the boards of management consists of a third of seats allocated to representatives from the travelling public, a third from the workforce and a third from the local authorities. Here there would be a balance between producer and consumer interests.

The issues to be resolved here would include whether the unions would be the only representatives of the workforce, whether businesses would be entitled to seats and whether local authorities are closely connected enough to be the genuine representatives of the public at large.

Another model would be that all members of the board of management would be elected directly by citizens and those wishing to be board members stand on platforms of representing workers', business and passengers' interests and so on.

These are all issues which we can explore in more depth later once we have won the debate on the need for public or social ownership. The key thing here is that the primary purpose of these services (including financial services) being in public ownership would be that they are run on the basis of social need and not private profit.

What this means is that the constitution or articles of association of these organisations would be changed from the objective of pursuing private shareholder interests to providing services. The organisations would not then have to be concerned with chasing profits, market value, market share or being taken over by a rival.

The banks would then operate under this system by creating social justice and social inclusion by keeping open wide branch networks (with one in each community), practice safe lending, work by the principles of ethical investment and return surplus back into their operations to increase service provision.

The way in which the left can do this is by questioning each and every action of the government by saying 'Whose interests are being served by this?', 'Whose money is being used for this?' and 'If public money is being used, where is the public control?'

There is a role for left MPs in laying bills before Parliament to put organisations into social ownership instead of allowing this Labour government to remain the bankers' friend by doling out hand-outs to them.

The unions need to use their influence inside and outside Parliament to support these moves. Rather than being overly fixated on windfall taxes and curbing bonuses, they could tackle the underlying causes – rather than just the symptoms – by supporting social ownership. The odd call for public ownership of the utilities needs to be made writ large.

In New Zealand, after a period of brutal Thatcherism in the 1990s, the left-leaning coalition government has made moves to start to bring back some services (rail, air) and sectors (banking) of the economy back into state control. This may not be exactly what we are after but it does show that our calls are not going to be silent cries in the dark if we pitch them in the right way and loudly enough.

One good starting point is a new pamphlet just published by the Left Economic Advisory Panel which is part of the Labour Representation Committee headed by John McDonnell MP. It's called 'Building the new common sense: social ownership in the 21st century'. It has contributions from RMT general secretary, Bob Crow, and former Morning Star economics editor, Jerry Jones, amongst others. Copies can be bought for £3 either online at www.l-r-c.org.uk or by sending a cheque payable to 'Another World is Possible' to LEAP, PO Box 2378, London, E5 9QU.