John Lewis vs easyCouncil
Amongst the more surreal policy-related headlines of recent months was this from The Guardian: ‘It’s John Lewis’ vs ‘easyCouncil’ – battle for social policy starts here’.
OK, so it’s not quite as bonkers as this week’s ‘Economics briefings for Queen could head off financial crisis’. But one still has to ask – how did we reach a stage where the election was being framed in terms of a department store versus an airline?
The Government’s interest in ‘John Lewis public services’ has been growing rapidly over recent months. What does this expression mean, and how did the idea suddenly gain such currency?
John Lewis, as most people know, is owned by its employees, otherwise known as ‘partners’. Being mutually owned and controlled (as opposed to a more orthodox model, in which employees buy shares directly in their company) the company exists for a purpose beyond the extraction and distribution of profit, although this isn’t to say that it isn’t profitable. As with building societies, employee-owned mutuals are capable of taking decisions that are considered in the long term interests of their members, whether economic or otherwise. How this is stipulated depends on their constitution.
In Reinventing the Firm, published in September, I looked at how the economic crisis offered an opportunity to shift more of Britain’s wealth-production towards this model, as people grew sick of the short-termism and inequitable outcomes of the shareholder-oriented model of the PLC or private equity-controlled firm. There was – and still is – a real opportunity to champion this alternative model of capitalism, in which the interests of finance are balanced against those of employees and society. The report concludes with a number of concrete policy suggestions that could aid this development.
Mutualism is now flavour of the month with the government. The Cabinet Office commissioned a useful study from the Innovation Unit, entitled The Engagement Ethic. Tessa Jowell announced the creation of an ‘Ownership Commission’, to investigate ways of harnessing mutualism further. And recent reports suggest that the next Labour manifesto will have ‘the co-operative ideal at its heart’. So far so good.
But there is one seemingly obvious question that has gone unasked: do they want more mutualism in the public sector or the private sector? The phrase ‘John Lewis public services’ performs a nifty sleight of hand, by taking lots of warm feelings about a cooperatively-owned and much loved department store, and bolting them on to the state. To date, Labour has made lots of noises about this being a ‘mutual moment’, about wanting a fairer model of capitalism and attacking greed in the financial sector… and then slipped seamlessly into a discussion of public service reform. The media has let them get away with it.
There are some decent arguments for greater use of mutual-type models in the public sector, and some impressive examples of this working well already. But this is an entirely different (and more humble) agenda from the one which many of us were hoping promote, namely of achieving a different way co-ordinating management, financial capital and employees in businesses. In case this isn’t glaringly obvious, think of three important distinctions.
Firstly, private sector organisations typically make a profit, while public sector organisations don’t. This doesn’t mean that businesses exist to make a profit, or that they should seek to maximise their profit, but simply that they usually make some surplus that requires distributing or retaining. In the private sector, employee-owners receive whatever dividend is distributed. This isn’t necessarily what they value most about being owners, but it necessarily affects their psychology one way or the other. And it isn’t a feature of public sector mutualism.
Secondly, public services exist for the public good, usually with some notion of their users as equal citizens of society. It is no criticism of John Lewis to say that they are more concerned with their ‘users’ as consumers. Mutualism may be an effective way of injecting the public, citizen interest into public services, and almost certainly a better alternative than privatisation. But there is still a risk that accountability and public interests could be weakened by what is, after all, a severing of public institutions from a democratically elected state that otherwise owned and governed them.
If mutuals exist in an appealing grey area between the public and the private sector, let’s not forget that this therefore has inverse implications for each. Mutualism makes private sector organisations more attuned to the common good, but equally makes public sector organisations more attuned to particular private interests. This needn’t be a bad thing, where the alternative is bureaucratic medalling. But the argument is entirely different from that which is made for mutualism in the world of business and finance.
And finally, unless one believes David Cameron’s peculiar 2009 conference speech, the crisis was more a consequence of capital behaving badly than of the state doing so. It seems perverse, therefore, that we should seize the subsequent opportunity to reinvent the state, as necessary as that may be, while leaving capitalism roughly as it was.