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next system project
6 Ways We're Already Leading an Economic Revolution
From the “buy local” movement to public banking, we’re well on our way to a more democratic, cooperative, and people-centered economy.
Sep 07, 2016
Many years ago, while researching the history of the U.S. decision to use atomic weapons on the people of Japan, I came to understand something: There was something deep at work in the American political and economic system driving it toward relentless expansion and a dangerous, informal imperialism. I began thinking about how to fundamentally change America out of concern with what America was doing--and is still doing--to the rest of the world.
Many experiences since--especially working in the U.S. House, Senate, and at upper levels of the State Department trying to resist the war in Vietnam; and thereafter with activists in the antiwar and civil rights movements--taught me something important: It wasn't enough to stand in opposition to the injustices America inflicted on the world and its own people. It was equally important for these movements to operate with an idea of what they want instead.
Could we imagine a system that undercuts the logic responsible for so much suffering at home and abroad?
It was reflections like these that brought me to first sketch the idea of a "pluralist commonwealth"--an economic and political system different from both corporate capitalism and state socialism grounded in democratic ownership, decentralization, and community that could fulfill two key functions. On one hand, it offered a general map of where we might want to go--a design for a next system in which a plurality of overlapping institutions reinforce each other to democratize our common wealth. On the other hand (and unlike other more utopian blueprints), I've always believed that the Pluralist Commonwealth, grounded in everyday American reality--like the deep cooperative tradition of the Wisconsin where I grew up--was also an effective guide to how we might actually get there.
While progress is never strictly linear, I believe that we are beginning to see an accelerating development of the foundations for a system that looks a lot like the Pluralist Commonwealth, and a growing recognition of how they begin to fit together.
So how do we maintain and deepen the momentum? Here are six areas where it's particularly strategic to be organizing and building institutional power in the current moment.
1. Public banking: Take it to the cities
Public banking, which invests capital for the common good rather than Wall Street's bottom line, has existed at the state level for nearly 100 years in North Dakota.
Now, activists are taking this model to cities and uncovering exciting possibilities. In Santa Fe, for instance, organizers have worked with Mayor Javier Gonzales to begin serious consideration of a municipal-level public bank. As an official city study released earlier this year showed, instead of the city's $200 million in cash deposits sitting in large, nonlocal financial institutions, a municipal public bank could leverage those deposits to reduce borrowing costs for the city--saving millions of dollars of taxpayer money every year that would otherwise go toward costly bond offerings.
Similar efforts in Philadelphia and other cities are also picking up steam as more and more people discover just how much money is wasted on Wall Street to finance the growth and development of city infrastructure. Why make a bond trader rich when you could build better schools and lower taxes instead?
A municipal public bank could save millions of dollars of taxpayer money every year.
The publicly owned Bank of North Dakota has long strengthened the state economy, expanded access to affordable credit, and contributed its revenues to supporting vital services like education. But the institution is also the product of a unique history, in which progressive populism was able to use the state Legislature to create this innovation. Today, in the face of relatively unresponsive state legislatures, progressives are proving that cities are promising spaces to channel energies for creative action.
By demonstrating the power of finance as a public utility, the public banking movement is building momentum for and giving shape to a democratic system of investment that is much larger. Public banks, credit unions, and community development financial institutions can all grow over time to displace the financialized, profit-seeking banking sector, helping turn the tables to put the public's money to work for the benefit of everyone.
2. Worker ownership: Build the ecosystem for economic democracy
There's been an explosion of interest in worker cooperatives as a simple solution to begin democratizing ownership of the economy. An ecosystem is emerging that allows people all across the country to accelerate these cooperatives' development by engaging local governments for support, converting existing businesses, or even investing personal savings into their expansion.
Worker cooperatives, by directly shifting ownership and control of the workplace to workers themselves, are some of the most intuitive and immediately appealing institutions of the Pluralist Commonwealth. Studies show that worker-owned companies don't just democratize wealth, they can also operate more efficiently and are more likely to stay in business than "normal" firms.
Yet while there are more than 10 million Americans working in companies in which they also own a share, the number of worker cooperatives--where these shares are equal for all workers, and come with an equal vote in the future of the business--is far smaller.
But this isn't because of some intrinsic problem with worker co-ops. Traditional businesses, in which workers labor for someone else's profit, have an entire ecosystem of support--from the business schools that train their managers to the banks and public subsidies that finance their creation and expansion.
Worker-cooperative advocates are building a parallel ecosystem of this kind all across the country. Cooperative development projects like the Wellspring Collaborative in Springfield, Massachusetts, and the CERO cooperative in Boston are creating exciting new crowdfunding mechanisms to help communities launch democratic enterprises. Organizations like The Working World and the Shared Capital Cooperative are building national networks to channel financial resources into the cooperative economy, creating diversified opportunities in which both institutions and individuals can invest.
In cities like New York, Madison, Wisconsin, and Rochester, New York, municipal funding is now being used to support the work of cooperative developers focusing on creating worker-owned businesses in low-income communities. There is no reason why every city and town's existing infrastructure for helping small businesses cannot be turned toward democratic alternatives, and the more this happens, the easier it becomes to make the case to community stakeholders and policymakers.
A key opportunity here is conversions of existing businesses. As the boomer generation retires, the future for hundreds of thousands of small- and medium-sized businesses is unclear. Without a succession plan, many of these businesses may get absorbed by financialized private equity or simply cease to exist. If we organize to take advantage of this historical moment, we can convert many of these to worker-owned businesses instead.
3. Procurement politics: "Buy local" at a bigger scale
Solid local organizing is shifting the purchasing behavior of place-based nonprofit institutions--or "anchor" institutions--toward sustainability and economic inclusion. This means big steps toward the Pluralist Commonwealth can be achieved with relatively small amounts of activist resources.
Consider the Real Food Challenge: In less than a decade, this network of student activists has secured pledges to shift more than $60 million of food purchases at 73 colleges and universities across the country into more sustainable and just options.
Opportunities exist in every aspect of anchor institution operations. A student-led study at the University of Michigan found that just a 5 percent shift in procurement to local suppliers would increase local economic activity by more than $13 million and create more than 450 jobs.
Nonprofit hospitals may be particularly open to such demands with new rules under the Affordable Care Act mandating "community health need assessments"--reports that can illuminate the role that poverty plays in poor public-health outcomes and make clear the responsibility of health care institutions to use their resources to address economic inequality.
And campaigns to alter purchasing can strategically link up with campaigns to shift investment dollars in the same institutions. For instance, the Reinvest in Our Power campaign is mobilizing students to demand not just divestment from carbon in their schools' endowment portfolios, but active reinvestment in community-controlled financial institutions.
"Buying local" may make us feel better about the consequences of our consumer choices, but when we change the way our public and large nonprofit institutions like universities and hospitals spend their money, we're shifting hundreds of billions, if not upwards of a trillion, dollars into local economies--and creating a kind of decentralized planning system in the process.
This is the concept behind the Evergreen Cooperatives, which channel the purchasing power of Cleveland's biggest anchors into a network of green worker cooperatives, creating opportunities for ownership in some of the city's hardest-hit communities and communities of color.
As we work to shift the dollars spent by public and nonprofit institutions into patterns that support and stabilize thriving local economies, it's important to remember that we must defend our right to do so politically. Right-wing state legislatures and large-scale international trade agreements like TTIP and the TPP aim to remove barriers to the global movement of capital and undermine local procurement initiatives.
4. Participatory governance: Organize for renewed democracy
At the heart of the Pluralist Commonwealth is the idea of renewed democracy. We all know that American democracy is severely broken--but just "getting the money out" of our political system is insufficient.
A compelling alternative is suggested by participatory budgeting, which allows residents of a community to vote directly on how a portion of public money is spent. The mechanism, developed initially in Latin America, has been making substantial progress in the U.S. in recent years and can be built upon, shifting our political culture away from spectacles of personality and toward real engagement with the project of self-government.
Boston has placed $1 million of public money under binding, directly democratic control of Boston residents between the ages of 12 and 25.
Following the lead of city officials in places like Chicago and New York who embraced participatory budgeting to manage discretionary funds, smaller cities like Vallejo, California, and Greensboro, North Carolina, have embarked on citywide participatory budgeting processes. Santa Fe, New Mexico, is pioneering a participatory budgeting process tied to a fund for renewable energy investments.
While the amounts of money in each project to date remain small, participatory budgeting at once normalizes the demand for direct community control over the allocation of resources and provides a site in which the muscles of community self-government can be strengthened and scaled up. In short, it is an organizing process as much as it is budgeting process. And it's only through such organizing and development that we can build toward higher-order processes of truly participatory planning.
Boston's trailblazing participatory budgeting process, for instance, recognizes the key role it can play in developing long-term community leadership by prioritizing the city's youth. Boston has placed $1 million of public money under binding, directly democratic control of Boston residents between the ages of 12 and 25.
And even in cities where municipal officials aren't ready to embrace direct participation in budgeting, there are plenty of opportunities for creative grassroots organizing to expand participatory budgeting. The Department of Housing and Urban Development has officially endorsed it as a way to implement required community oversight of money allocated locally through Community Development Block Grants. In Toronto, for the past 13 years public housing residents have had direct, binding control over millions of dollars of annual capital improvement funding.
As we seek to reinvent, reinvigorate, and revitalize American democracy, we can begin by empowering the communities far too commonly denied the right to meaningfully participate.
5. Energy democracy: Plan it by region
Building democratic ownership at the community level opens up the possibility for planning. In Boulder, Colorado, citizens felt that their city's power supplier--corporate giant Xcel Energy--was not taking the threat of climate change seriously. Rather than trying to force the company to comply with regulations, the residents of Boulder decided to take their utility back. When this municipalization (currently in progress despite multiple political and legal roadblocks thrown up by the corporate incumbent) is complete, the city will be able to democratically manage its own energy sources.
Boulder proves that planning is by no means necessarily undemocratic or centralized--in fact, one of the reasons I believe changing the underlying ownership patterns of the economy is so important is that it begins to unlock possibilities not just for a more equal distribution of wealth, but for the kinds of decentralized planning we need.
Ultimately, we need to be scaling up beyond the city level to the regional level if we really want to plan effectively for a new energy system. Those most affected by the old energy system already realize this--and in many cases are at the forefront of efforts to imagine what a just transition looks like at a regional level.
A particularly exciting effort is the one being led in parts of Appalachia by groups like Kentuckians for the Commonwealth and Mountain Association for Community Economic Development. Faced with a recalcitrant state government opposed to implementation of the federal Clean Power Plan, local activists have been engaging stakeholders on the ground to develop a clean power plan of their own, from below, with a particular focus on rebuilding economic opportunity for the workers and communities that have traditionally depended on the coal industry as one of the few sources of jobs in the region.
Even without the ability to directly translate this popular planning process into public policy, such activism, oriented around large-scale alternative visions, can be a powerful organizing tool as we work toward a post-carbon future.
6. Stop imperialism, tame growth
I have worked nearly my entire life in the United States, inside what has been the most powerful capitalist state in the world. And while bottom-up, grassroots experiments at increasingly larger levels of scale are key, it is important to remember why they matter.
Simply put, without dismantling the engine of growth at the heart of the American economy, we don't stand a chance of making the world a sustainable and equitable place for the human species to thrive. This ultimately means transforming some very large corporations into public utilities, preferably at the regional level. Such entities would not be subject to the Wall Street maxim of grow or die, nor would they drag the U.S. into support of right-wing dictators willing to allow American corporations to control a good deal of their development.
Building the Pluralist Commonwealth in America is, to my mind, an act of anti-imperialism. But recognizing this deep connection between building a more local and sustainable economy at home and the well-being of the rest of the world does not absolve us of responsibility to oppose the government's efforts to reassert America's grasp on global hegemony. The same good conscience that leads us to reconstruct the American economic system over decades should also lead us to oppose the rattling of sabers, the support for the overthrow of inconvenient foreign democracies, and the destruction wrought by American military action overseas.
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The Internet Needs a New Economy
Just a year or so ago, Bitcoin was weird. The digital "crypto-currency" had become fairly notorious as a preferred medium of exchange for hackers, outlaws, and the most strenuous libertarians. The underlying blockchain technology - a secure, distributed database requiring no central server or owner - was earning the curiosity of radicals and visionaries who saw in it the means of re-engineering the whole social order, of replacing banks and governments with distributed systems that ordinary people could manage together.
Nov 11, 2015
Just a year or so ago, Bitcoin was weird. The digital "crypto-currency" had become fairly notorious as a preferred medium of exchange for hackers, outlaws, and the most strenuous libertarians. The underlying blockchain technology - a secure, distributed database requiring no central server or owner - was earning the curiosity of radicals and visionaries who saw in it the means of re-engineering the whole social order, of replacing banks and governments with distributed systems that ordinary people could manage together. Nowadays, however, the weirdness seems to be waning, along with the utopian promises. Governments are starting to craft policies for regulating blockchains, and Goldman Sachs' research division is studying them. Many of those same radicals and visionaries have now started working for banks.
Over and over, this is what happens with the most promising new technologies. From the telegraph to radio and television, early adopters imagine a coming reign of freedom and democracy. But then investors buy in and monopolies rise up, extracting profits above all and suppressing the next generations of innovators, at least until the next "disruption."
A different online economy is possible. Especially since the onset of the Great Recession, we're living through a renaissance of solidarity economies in the United States and around the world. The flourishing of farmer's markets, benefit corporations, credit unions, and fair trade demonstrates the longing for enterprise that serves the common good, rather than merely rolling in profits for the few. A bedrock of any solidarity economy is the old idea of cooperativism--sharing ownership among those affected by an enterprise and governing it democratically.
The tech industry, meanwhile, for all its talk of "sharing" and "democratizing," has become addicted to a business model of massive early investment in exchange for massive short-term returns. Ordinary users are made to think that the platforms that they use every day are meant for them, and that they're free, even as the personal information they share is sold off to pay investors. People working in Amazon's warehouses, so-called crowd workers assembling a living out of on-demand fragments of jobs, and Uber's increasingly precarious drivers are among those who shoulder the price as they see their rights and protections evaporate. This is not a bug, it's the business model.
The tech industry, for all its talk of "sharing" and "democratizing," has become addicted to a business model of massive early investment in exchange for massive short-term returns.
The solidarity economy is creative and energetic, spawning healthy attitudes toward work and more sustainable forms of financing. But this movement, perhaps because it prioritizes offline essentials like sustainable agriculture, local communities, and alternative energy, has yet to infiltrate the Internet as it should. Members of a food cooperative, for instance, may not notice the contradiction when they keep their files on Google Drive, process their payments with Square, and buy ads on Facebook. For now, these kinds of tools can seem unavoidable, though they need not be. The solidarity economy deserves a solidarity Internet.
This November, we are convening a two-day event at The New School in New York City about what we call "platform cooperativism." We're operating on the hunch that many of the economic challenges we face - wealth inequality, job security, health coverage, pensions - can't be addressed adequately without the reorganization of how online platforms are owned and governed. Platforms are already reorganizing our economy; let's reorganize them first, putting solidarity at the center.
At the New School, we will be hearing from co-op developers alongside tech CEOs, city officials alongside low-wage workers, labor organizers alongside philosophers. What was initially supposed to be a small-scale gathering has met an explosion of interest from around the world. We realized that we are not alone in longing for an Internet where people share collective ownership, not just cute cat memes, where people can co-create bonds of solidarity rather than just blindly agreeing to corporate terms of service. Over the past few months, we have been preparing a showcase of actually-existing projects that have collective ownership at their core. We will hear, for instance, from the people behind Stocksy, an artist-owned stock-photography website, and Resonate, a cooperative music streaming platform. Backfeed, Swarm, and Consensys will show us the potential of the technology that made Bitcoin possible. We'll learn about several new platforms that put labor markets under the control of workers themselves.
We realized that we are not alone in longing for an Internet where people share collective ownership, not just cute cat memes, where people can co-create bonds of solidarity rather than just blindly agreeing to corporate terms of service.
The history of the Internet itself is full of lessons and opportunities that the solidarity economy can learn from. Projects like Wikipedia and Debian - a variant of the open source operating system Linux - have established processes for self-governance online: for collaboration, decision-making, and accountability. They have shown that people spread across the world can work together. But for all the Internet has done to spread the spirit of sharing, this has too rarely extended to where it would matter most - sharing real ownership of platforms. Whoever owns these platforms will determine how we work, how we connect with each other, and what becomes of our personal data.
Platform cooperatives are not a simple fix-all solution to all our problems. Already, they take many kinds of forms, and they raise new challenges in place of the ones they address. We are certainly not suggesting that technology can single-handedly democratize society. Rather, we are trying to bring together the existing cooperative movement, with its valuable offline experience, and those in tech culture who are looking for strategies for expanding ownership and governance online.
There's a rich history of offline cooperatives to draw from in building a new digital economy.
This may mean rethinking what a cooperative can look like. In an online economy where the line between users and producers is getting steadily more blurry, cooperative platforms won't always sit comfortably within the traditional framework of cooperatives centered around workers, producers, or consumers. Will a cooperative social network need to elect a traditional board, or can members make decisions more dynamically with online polls? Can a platform with global reach distribute ordinary shares to all of its members, or will it need to rely on cryptocurrency tokens? Can the right kind of platforms make a flexible, gig-based career actually more secure and reliable than a 9-to-5 with a single employer? While extractive online monopolies - from Amazon and Facebook to Taskrabbit and Uber -- have used the Internet's gray zones to skirt labor law, cooperative platforms would allow us to invent the future of work on our own terms.
Enabling such enterprises to grow and thrive will be no small feat. Cooperative businesses require a different kind of ecosystem than what fuels today's online monopolies. This means, for instance, forms of financing that allow the people most affected by platforms to retain ownership and control, while still reaching appropriate scale. We'll need cooperative incubators, cooperative legal clinics, and federations that coordinate the open-source software development that co-ops need. Governments will need to enact policies that make it easier for cooperative enterprises to flourish in the context of markets stacked against them. Cooperative platforms will mean different approaches to interface design, to office life, to how we identify and support entrepreneurs. This is an opportunity, also, to foster a better kind of tech culture - one that is more inclusive, imaginative, and accountable than the bro-grammer all-too-accurately lampooned on HBO's Silicon Valley.
Cooperative businesses require a different kind of ecosystem than what fuels today's online monopolies.
The same weekend as we convene Platform Cooperativism in New York (entrance is gratis, the public invited), the Silicon Valley elite will be gathering for O'Reilly Media's Next:Economy conference to discuss the future of work. "No company, no job is immune to disruption," its website boasts, and for $3,500, you too can attend. But the future need not emanate from there. The same weekend, in Cincinnati, the much more modest Union Co-op Symposium will gather those who are organizing to disrupt the reigning elite with cooperatives. We hope to amplify the growing chorus seeking real ownership and control over the systems that determine the shape of our lives. It's time to bring the solidarity economy online.
Published in cooperation with New Economy Week
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Don't Believe the Corbyn Bashers - The Economic Case Against Public Ownership Is Mostly Fantasy
Though cowards flinch and traitors sneer, Jeremy Corbyn is putting public ownership back on the political agenda. Time to examine frequent claims that public ownership is inherently bureaucratic and inefficient.
Sep 11, 2015
E.P. Thompson, the great historian of the English working class, famously warned of the need to rescue our labour movement forebears from "the enormous condescension of posterity." Today, with Jeremy Corbyn poised to take over the leadership of the Labour Party on a wave of popular acclaim, we can appreciate Thompson's injunction all the more. Virtually the entirety of the Westminster political class and their hangers-on in the house-trained media have lined up to denounce Corbyn - and the economic ideas he represents - as a ridiculous throwback, a ghost or revenant from Labour's troubled past who must be exorcized in order that the party may again, as a famous manifesto once put it, face the future. Centrist technocrats always fetishize the future - "our comfort zone," as Tony Blair has proclaimed it - not least because, unlike the past, it holds no dangerous lessons. "History teaches," Gramsci wrote, "but it has no pupils."
In the last few weeks the struggle has been joined, not only for the future direction of the Labour Party but also for the recovery of historical memory. An ideological ice age is coming to an end, but as the neoliberal permafrost breaks up we should expect great efforts to preserve the power of the economic narratives that have served our masters so well for the best part of four decades. Every myth and threadbare cliche is being dusted off and put to service by a shrieking commentariat unnerved by the prospect of a major breach in the ruling consensus. The Daily Telegraph, abandoning earlier - and childishly obvious - attempts at reverse psychology, now editorialises that Jeremy Corbyn must be stopped, not least because "he offers a return to the 70s when he imagines Britain was happier and more equal. Those who struggled to bury their loved ones or climbed through piles of rubbish during the Winter of Discontent remember it less fondly."
First, the evidence shows that Britain actually was a happier and more equal place in the 1970s. 1976, according to the New Economics Foundation, was the happiest year on record. And while the Winter of Discontent has become the stuff of legend, it was (as John Medhurst has documented) to a large degree a propaganda device manufactured by the right-wing media. For example, there were in fact only two instances (one in Liverpool, the other in London) of bodies being kept on ice because of strike action. Derek Jameson, the editor of the Daily Express at the time, admitted to politically motivated fabrication: "We pulled every dirty trick in the book. We made it look like it was general, universal and eternal, whereas it was in reality scattered, here and there, and no great problem." (Medhurst, 2015, 2-3)
Brush away the surface vitriol directed at Corbyn and much of the opposition stems from outrage at his temerity in challenging perhaps the most important edict in the neoliberal canon, the automatic superiority of the private over the public. This is especially true when it comes to the ownership of capital. In this credo, public ownership must always be less efficient than private ownership. But even a cursory glance at the record (contemporary and historical) shows that the army of hacks parroting this line haven't the faintest idea what they're talking about. In the words of Richard Pryke, whose massive Public Enterprise in Practice pioneered the disinterested survey of the economics of the nationalised industries, the belief that they underperformed "is a dogma which arose during the first and most difficult years of public ownership, and has lived on to become a serious obstacle to rational inquiry and rational conviction." (Pryke, 1971, 443-44)
For the newly re-emergent British left, stumbling blinkingly out into the sunlight after long hibernation, today's heroic attempts to overhaul an ossified politics must be accompanied by deep substantive challenges to the official version of history. Only in this way might we regain access to the vast accumulations of learning and experience that once made up the political economy of everyday socialism. There are reasons why, time and again, new generations of activists return to and rediscover the appeal of particular institutional forms and approaches. Not everything has to be created anew, and a careful sifting of the past will uncover powerful lost traditions and practices for the remaking of society and the economy.
Public versus private ownership
Before turning to the matter of a renewed programme of public ownership, it is worth dispelling the most obvious myth peddled about its economic performance. For this we need to clarify the actual historical record of public ownership, principally in the United Kingdom but elsewhere as well.
The nationalisations of the postwar Labour government brought the Bank of England, coal, steel, civil aviation, and all the major utilities into public hands. This was conducted in the teeth of vehement political opposition, including interventions on behalf of the British private sector by the United States government. Nevertheless, by 1951 Labour had reorganised large chunks of British industry and assembled a public sector workforce of 4 million, 18 per cent of the total. A fifth of the economy was in public hands, with the government sector responsible for a third of net fixed capital formation (Saville, 1993, 37-60). It remains today the most radical economic programme ever implemented in Britain. Unfortunately, highly partisan interpretations of the decades that followed, up until the Thatcher privatisations of the 1980s, form the basis upon which widespread claims about the relative merits of public and private ownership in the United Kingdom largely rest.
There is no doubt that the political economy of nationalisation in Britain bequeathed a problematic legacy for the left. There were major drawbacks to the form of public ownership adopted. Responsibility for delivering Labour's nationalisation programme fell to Herbert Morrison, who on the strength of his experience with the London Passenger Transport Board in the 1930s favoured a model of large, top-down, centralised public corporations at arm's length from democratic control. This dismal managerialism was a far cry from popular calls for worker self-management, while the centralisation involved had the malign effect of supplanting older and more plural traditions of municipal and cooperative ownership (Cumbers, 2012). Just as significantly, the policy framework within which nationalisation took place compromised the profitability of public firms from the outset.
To begin with, nationalisation in Britain largely took the form of "lemon socialism," extending for the most part to industries that had not been particularly profitable in private hands, and for which their owners were richly compensated. HM Treasury doled out PS2,555,000,000 to the former owners of nationalised companies, an extraordinarily generous sum (as was recognised at the time) given chronic underinvestment across the board, with the steel industry only a partial exception. The failure to incorporate industrial democracy into nationalisation had a particularly debilitating effect upon political support among workers, as Raymond Williams pointed out, with public firms reproducing, "sometimes with appalling accuracy, the human patterns, in management and working relationships, of industries based on quite different social principles." (Williams, 1965, 330)
To make matters worse, government policy dictated their subordination to the needs of private industry in the form of unrealistically low pricing of outputs. This meant that the nationalised industries provided large and continuous subsidies to the private sector, making them in effect "sinks" that disguised the poor performance of the British economy overall while reinforcing existing industrial power relations (Cumbers, 2012, 20). The result was low profitability, an altogether inadequate measure of their overall performance, but one that fed into widespread perceptions of inefficiency and bureaucratisation and eventually made them sitting ducks for privatisation.
And yet, for all their problems, the data on the performance record of the nationalised industries simply do not bear out such negative verdicts. There are significant methodological difficulties in making comparisons between public and private firms, especially when it comes to profitability, which analysts have found to be a not particularly illuminating metric. Profits are strongly affected by prices, and (as noted above) public sector firms were often subjected to price controls and related interventions - imposed both to hold down prices as part of wider counter-inflation policies and to provide hidden subsidies to private industry. As a result, academic studies aimed at making public-private comparisons have tended to adopt measures other than profitability as an index of efficiency, especially total factor productivity.
Robert Millward, Professor Emeritus of Economic History at the University of Manchester, is perhaps the dean of economic historians working on comparisons between public and private enterprise. A comprehensive 1983 survey of the evidence by Millward and his colleagues, Public Sector Economics, offered as its first conclusion that "there is no systematic evidence that public enterprises are less cost effective than private firms." (Millward et al, 1983, 258) In the energy sector, for example, none of the cost studies examined supported the argument that public electricity providers had higher unit costs or lower productivity than private firms (ibid, 244). Of course, as was acknowledged, the data and time series then available were limited. But Millward's later work using additional data has confirmed his earlier conclusions. In fact, remarkably, it appears that the nationalised industries actually outperformed both the rest of the British economy and their privately-held equivalents in the United States:
"On the new evidence, the British total factor productivity growth record in most of the nationalized industries was significantly better than that of their U.S. counterparts and better than that in the whole of the British economy. To be more specific, the average annual rate of total factor productivity growth from 1950 to 1973 was higher in Britain than in the U.S. for airlines, electricity, gas, and coal... The proposition that privatisation in Britain led to an improvement is contradicted by a comparison of these figures with those for 1973-1995, when the growth rates for airlines, gas, and electricity were lower... The state enterprise in Britain compared favorably in productivity growth with comparable sectors in (the more privately owned) U.S. industries and with the privatised regimes which followed in Britain." (Millward, 2011, 24-27)
Nor is Millward alone. "Although it would not sit comfortably with the beliefs of new Conservatism," observes Michael Oliver, an economist not known as an advocate of public enterprise, "economic historians have found that the long-term trend of productivity in Britain's nationalized industries was no lower than that for private firms." (Oliver, 2014, 271) Similarly, the late British economist and journalist Christopher Johnson - a supporter of privatisation -found that "many of the improvements in manning and productivity claimed for privatisation took place in nationalised industries before privatisation and in those not privatised." (Robinson and Rubin, 1998, 17)
University of Glasgow professor Andrew Cumbers, drawing upon examples from around the world, found that "contrary to the current received wisdom, the experience and performance of statist public ownership was highly varied." For instance, "Korea, Taiwan and Singapore all used state-owned enterprises to fuel spectacular economic growth." (Cumbers, 2012, 33-34) "The conviction that public production is inefficient has been sufficiently strong for empirical evidence to seem irrelevant," economist Johan Willner wrote in 1996. "Successful counterexamples do not make headlines... The empirical research has been unsystematic, but there exists by now a fairly large number of industry studies which throw light on the relative efficiency of public ownership." (Willner, 2005, 28) Similarly, Tel Aviv University Professor Yair Aharoni concluded that "[t]he assumption that ownership per se creates an environment that is conducive to high or low performance is not proven, and empirical research on this point has yielded conflicting results." (Aharoni, 2000, 50)
A plethora of other studies draw similar conclusions. In 1997, University of Chicago economist Stacey Kole and University of Georgia professor J. Harold Mulherin studied U.S. government ownership of seized American subsidiaries of German and Japanese companies during and after the Second World War. They found no difference between these publicly-owned firms and their private counterparts, and stated that the "results stand in contrast to the typical results regarding the inefficiency of government enterprise." (Kole and Mulherin, 1997) In 2006, writing in the World Bank Economic Review, Colin Kirkpatrick (University of Manchester), David Parker (Cranfield University), and Yin-Fang Zhang (University of Manchester) concluded that, with regards to African water utilities, "the results for cost efficiency and service quality fail to show that privatised water utilities perform better than state-run utilities." (Kirkpatrick, et al., 2006) Moreover, these results supported similar prior research on the sector. In 2014 the OECD summarized a number of studies of publicly-owned German banks and wrote that "[s]avings banks appear to be at least as efficient as commercial banks." And writing in the Harvard International Journal, Francisco Flores-Macias and Aldo Musacchio maintain that "[t]he world has changed" and modern public enterprises can be "efficient, even in comparison to their private counterparts." (Flores-Macias and Musacchio, 2009)
How efficiency is defined and conceptualized is rarely discussed, yet crucial. For instance, a 2000 review of empirical studies by University of Oklahoma privatisation expert William Megginson and University of Georgia Professor Jeffry Netter states that "to a large extent we ignore the arguments concerning the importance of equitable concerns such as income distribution... The effects of privatisation on productive efficiency, or at least observable variables that are proxies for productive efficiency, is the focus of most of the empirical literature we review here." (Megginson and Netter, 2001) However, because public enterprises often exist to fulfill social - not just market - requirements, traditional measures of efficiency are not adequate. According to Aharoni, "it is not enough to measure performance in strict economic terms. One has to measure the stimulus provided to other socioeconomic activities and other externalities... Financial measures are misleading for those who see [a public enterprise] as a government instrument that should strive to achieve objectives such as a more egalitarian distribution of income, regional development, technological self-sufficiency, poverty reduction, or development." (Aharoni, 2000, 52-53)
Even the World Bank summarizes the efficiency argument with an important warning about its focus on the profitability measure: "[A]n enterprise's profitability summarizes all the indicators of economic efficiency as seen from the viewpoint of its private owners," it states. "But from the point of view of national economic growth and development, social costs and benefits, which are not reflected in profitability, can be no less important. For example, when a privatized enterprise achieves profitability by dismissing its excess workers, the economy as a whole does not necessarily become more efficient. If economic conditions prevent the fired workers from finding other employment or starting their own business, this downsizing might lead to an overall economic loss for the country because people were moved from low-productivity jobs to zero-productivity unemployment."
Additionally, as previously indicated and contrary to the dominant perspective, comparing the efficiency of public and private enterprises is highly problematic. "In comparing [state owned enterprises] to privately owned firms," Megginson and Netter write, "it is difficult, if not impossible, to determine the appropriate set of comparison firms or benchmarks..." (2001) In one of the few studies to investigate roughly comparable firms - in this case, public and private railways in Canada - Douglas Caves and Laurits Christensen announced that "[o]ur principal conclusion is that public ownership is not inherently less efficient than private ownership."
Another instance facilitating direct comparison is the utility sector in the United States, where public enterprises operate alongside private investor-owned companies. Aharoni again: "Overall, the studies of electricity utilities in the United States do not provide support for the assumed superiority of private ownership..." (2000, 57) Harvard University Professor John Donahue is even more emphatic. He found that "[t]he evidence broadly contradicts the common presumption that private utilities will operate more efficiently than their public counterparts." (Donahue, 1989, 76) A recent American Public Power Association study, for example, found a median net revenue transfer to municipalities of 5.5 per cent of revenues for public utilities. By contrast, the median tax payment of investor-owned utilities was roughly 25 per cent less, or 4.2 per cent of gross revenues.
What form of public ownership?
On the basis of the evidence available, then, public ownership is decidedly not inherently less efficient. Sweeping claims to the contrary should be treated as ideologically motivated. The question for the British left at this point should not be a technical economic one about efficiency but a political one about power, democracy, the social benefits of ownership, and which particular forms of collective enterprise we might wish to promote.
Today, increasing inequality, poverty, environmental degradation and the catastrophic threat of climate change, together with a general sense of an impoverished public sphere and loss of local economic control wrought by decades of privatisation and globalisation, are pushing activists and theorists once again in the direction of the institutional structure of public enterprise. As calls for common ownership grow, many activists and thinkers engaged in its recovery and rehabilitation have already decided against a simple return to the top-down centralised public corporation model of the postwar Labour governments. Here Jeremy Corbyn has been very clear:
"I believe in public ownership, but I have never favoured the remote nationalised model that prevailed in the post-war era. Like a majority of the population and a majority of even Tory voters, I want the railways back in public ownership. But public control should mean just that, not simply state control: so we should have passengers, rail workers and government too, co-operatively running the railways to ensure they are run in our interests and not for private profit. This model should replace both the old Labour model of top-down operation by central diktat and Tories favoured model of unaccountable privatised operators running our public services for their own ends."
In this, Corbyn is very much in line with recent trends around the world in which the fightback against neoliberal privatisation of public services has been accompanied by the adoption of innovative new approaches to collective ownership. In this view, worker ownership, consumer cooperatives, municipal enterprise and a host of kindred institutional forms all represent ways in which capital can be held in common by small and large publics, including through hybrid models that draw upon two or more institutional forms. From the We Own It campaign to the Municipal Services Project, we are seeing the emergence of a more pluralistic approach to public ownership, one that is already finding practical application in attempts by governments, municipal authorities and social movements to reclaim the commons and bring back social ownership in the form of "public-public partnerships" and the like. By way of example, Paul Salveson's thoughtful vision for returning the railways to public hands would avoid the old nationalisation model and move instead to a devolution of rail responsibilities to the regions, accompanied by strong direct involvement by local communities. (Salveson, 2013)
Public ownership, then, can take many forms, of which the public corporation model adopted by the postwar Labour governments is but one - and hardly the most appealing. Dig a little deeper into the history of public ownership and some far more interesting precedents are to be found. In particular, as the search commences for ways to re-embed the economy and provide an expanding zone of decommodification to buffer against the market, there is a very substantial but somewhat forgotten history of local public ownership and municipal socialism upon which to draw for inspiration. This history demonstrates that public ownership can indeed serve to decentralise economic power, rebuild and stabilise local communities, allow for the possibility of real democracy and participation, and provide the institutional support for political and social movements dedicated to genuine systemic change.
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