The role of the mutual sector in forging a strong economy and a more equal society is fast becoming hotly contested territory in British party politics. In the wake of the most severe global depression for more than eighty years and the search for viable and practical alternatives to neo-liberalism, politicians across the ideological spectrum have ostensibly vied to champion and take ownership of the mutualist cause. The values and institutions of mutualism have the potential to act as a vehicle for a new politics of the public interest after the financial crisis, or so the argument goes. For the left in particular, mutualism offers an alternative to the Coalition government’s invocation of ‘the big society’.
Nonetheless, the operating frameworks of mutualism have been left unclear, and the means to achieve its goals often appear nebulous. On the one hand, mutualism may refer to an alternative form of economic organisation, namely common ownership of the means of production. In this instance, companies are owned as mutuals in order to give employees a greater stake, ensuring that workers are able to share in the fruits of profitability and growth. Employees are able to exercise greater voice in the overall management and direction of the firm, improving job satisfaction. This profit-sharing approach is commonly referred to in the British debate as the ‘John Lewis model’ and has a long lineage.
On the other hand, there is ‘social mutualism’ involving a particular approach to the organisation and delivery of public services, where both employees and those using public services can acquire greater control over their management and operation. This form of mutualism involves alternative models to both the market and the state, echoing the early 20th century emphasis on the importance of civil society. State-provided services may often be supplemented, or indeed supplanted, by local citizens’ and community organisations.
It is in the public sector where the potential for a rapid shift towards mutualist models is perceived to be greatest, certainly by politicians on the right. This is partly driven by the need for innovation in the light of financial austerity, alongside the recognition that a vibrant public realm is at the core of a successful, prosperous society. The public sector in the United Kingdom is undergoing the largest budgetary cuts since the Second World War, while all over Europe governments are imposing harsh austerity measures which may radically curtail the activities of the state. Public sector bodies and local councils in Britain are determining out how best to respond and adapt to the next wave of change driven by the cuts imposed by the Conservative-Liberal Democrat Coalition government.
Many on the British Left argue that such rapid cuts are hasty and have the potential to cause irreversible damage both to the public realm and to infrastructure and skills, weakening the productive capacity and long-term growth potential of the British economy. Indeed, there are many communities where ill-timed retrenchment may cause serious harm to the most vulnerable, and weaken the life-chances of children and young people in the most disadvantaged households. This echoes the opposition to ill-timed retrenchment across many countries in the European Union.
Nonetheless, there is also the need for a coherent strategy to manage the process of change underway. Indeed, there is a real danger that social democracy will concede the mantle of mutualism and community ownership to the Centre-Right, through knee-jerk opposition to Cameron’s ‘Big Society’ agenda. It is imperative that opposition to the cuts does not become an objection to the redistribution of power in British society. If the Left defines itself as defender of the monolithic state, it will be forever associated with unresponsive and centralising bureaucracy. Councils and local government, in particular, have to determine how best to maintain effective services in a climate of austerity, accepting that rising demands and tighter budgets require new delivery tools and new models of provision. There is no alternative to innovation, namely doing more for less and discarding the old rules of command and control.
There are a range of emerging models in the United Kingdom that have sought to capture the benefits of mutualisation, including Lambeth Council’s model of a ‘co-operative council’ in South London. A host of local experiments are also underway including the ‘Scallywags’ parent-run nursery in Bethnal Green, the ‘Holy Cross Community Trust’ day-care service in Camden, and ‘Southwark Circle’ which helps older citizens and their families through social networks that enable people to share their time, skills and expertise. They offer the potential for a real transformation of services struggling with rising demands and shrinking budgets.
So mutualism can be part of the answer to forging a new post-crisis conception of the state. Research carried out in May 2011 for the international think-tank, Policy Network (www.policy-network.net), showed that the majority of citizens in Europe had lost faith both in markets and the state. They recoiled against the behaviour of financial markets and the banks in the aftermath of the global crash, but they were also concerned about the state’s capacity to uphold and defend the public interest. The Left cannot adequately respond to the crisis by simply reasserting the state’s capacity to ‘command and control’, in a world where power is increasingly distributed at multiple tiers and levels beyond national governments.
The Coalition government’s response is contained within the rubric of the ‘Big Society’. They contend that the state in Britain has grown too large suffocating the ‘little platoons’, as Burke described them, that give life to civil society. A crisis that originated in the financial markets has been recast as a crisis of a bloated and over-extended state. The public sector therefore needs to be reined in, and in the future will be demonstrably smaller and leaner. The Centre-Right’s vision is of community-based organisations and mutuals supplanting taxpayer-funded providers, at least in principle ensuring provision for the most vulnerable.
Although interpreted as a veiled threat to the continuation of the universal post-war settlement, the British Conservative Party has co-opted traditional social democratic narratives, and has increasingly encroached on Labour’s ideological terrain. Mutualism has a rich history in the Labour movement and its principles are in many ways anathema to Conservatives, not least the notion of co-operative ownership of the means of production which represent a threat to universal property rights. The new government have remained conspicuously silent about the role of mutualism in the private sector economy. The accusation among many on the Left is that it is a convenient mask for engaging in ideological ‘gunboat’ politics, concealing the true nature of the Right’s agenda to drastically cut back public provision.
The challenge for the Left is to develop a clear vision of what kind of economy it wants after the financial crisis, and the role that mutual organisations might play in an era of public spending austerity and loss of confidence in Anglo-American business models. This narrative has to acknowledge the trade-offs and dilemmas involved in developing mutualist models of organisation both in public services, and across the wider economy after the crash.
First, as experience in the Netherlands and Nordic countries indicates, the cultivation of self-organising institutions and networks that are capable of delivering high quality public services requires decades of investment, as well as the appropriate cultural values, norms and an appropriate level of social capital. In other words, mutualist organisations will not be fostered and embedded within the course of a single five-year parliament, but will require decades of investment and resources to flourish in partnership with an ‘enabling state’. In order to generate alternative provision through the civic sphere, it is necessary not for the state to get out of the way, but to provide capacity and resources.
The second point is that mutualism in the public sector raises issues concerning equity similar to those posed by localism: how can equal access and quality of service be maintained nationally if there is much greater variation in how services are delivered locally. Left politics has traditionally been predicated on universality and uniformity, chiming with influential strands of opinion which express hostility towards ‘postcode lotteries’ in public services. Nonetheless, the only means of improving services in an age of austerity, enabling more citizens to experience and achieve excellence, may be precisely to tolerate greater variance in outcomes. But this remains heavily contested terrain for the Left, not least in Britain and in much of Northern Europe.
The third issue relates to the politicisation of mutualism as an approach to organisational reform in public services. While it is inevitable that mutualist ideas will be subject to contestation on both Left and Right, given that mutualist models strike at the heart of many fundamental questions about the role of the state in a modern economy and society, they often require long-term investment beyond the lifetime of any single parliament or government. The importance of integrating mutualism into a long-term consensus incorporating basic institutions and values ought not to be understated. For social democrats, it means reflecting on how institutional forms can be entrenched within the fabric of society, rather than swept away immediately in the wake of electoral defeat as may be the fate of Labour’s social reforms in the United Kingdom.
The final theme concerns the relevance of mutualism to the private sector economy. As this article has inferred, mutualism has been somewhat underplayed in relation to private sector institutions, not least because it challenges powerful interests and appears to contravene the establish norms of neo-liberalism, which despite the crisis remain deeply embedded in the global economic order. An agenda for mutualism in the private sector economy might work at several levels:
- The first is to ensure that if banks are deemed ‘too big to fail’ in the light of the recent meltdown in the financial sector, mutuals are promoted as a viable alternative form of financial organisation. A financial sector that contains vibrant mutual entities such as building societies and community-based credit unions will be more balanced and resilient. Mutually-owned banks and building societies might also help to restore the ties between banking and the local community, injecting credit into poorer areas while supporting the needs of expanding small and medium-sized businesses through a Community Reinvestment Act.
- A further means of promoting mutualism in the financial sector is to remove regulatory obstacles and constraints that prevent the emergence of new organisational forms. In the United Kingdom over the last decade, the Financial Services Authority (FSA) was often unsympathetic to the creation of more mutually-owned businesses. Government as a whole did little to streamline the legal and regulatory structures necessary for setting up new mutual businesses, and too little was done to capitalise organisations that would never be in a position to raise funds on the financial markets. There have to be viable alternatives to profit-maximising forms of shareholder capitalism in the United Kingdom economy.
- Finally, mutualism entails a new model of the firm where the board and senior managers do not exist merely to maximise the short-term profitability of the company, but see their role as ‘custodians’ preserving the business for the good of future generations. In that sense, a private company has to be understood as upholding public interest principles, as embedded in a community to which it owes duties and obligations. This is markedly different to the dominant orientation of Anglo-American free market capitalism. Mutual ideals are not just about developing mutually-owned businesses and organisations, but changing the culture of the wider economy.
The potential of mutualism lies in its vision of an alternative conception of capitalist economic relations. In advancing the politics of production, firms with an ethos of responsibility and long-term value creation will act as a spur to productivity and growth, the most likely source of comparative advantage for the West over the next fifty years. In furthering the politics of distribution, mutually owned businesses can help to ensure that more workers have a direct stake in the fruits of growth. This is a necessity in a global economy where wage returns to middle and lower income employees have declined dramatically over the last fifteen years across the industrialised nations. After the crisis, the solution cannot be merely to resurrect the old growth model which exposed the West to serious risk and instability. The Left should have the courage to frame a new economic agenda for the next decade.
In relation to public services, mutualisation is an important element in recasting the state after the crisis. However, it needs to be supported by a concomitant drive to transform the relationship between service providers, users and the wider community, reshaping the production process within public services. The key is to develop an ethos of shared responsibility which encourages autonomy and self-reliance where desirable. Increasingly, reform will have to involve working in partnership with citizens and communities rather than imposing change from the top-down, cutting across the traditional paternalistic ethos of the bureaucratic Left. Transferring ownership to non-state community-based institutions is desirable, but alone it is hardly sufficient. The objective ought to be a state in which power is shared between citizens, service providers, and elected representatives, supported by public service guarantees which entrench rights of equity and access. While condemning the ferocity of the cuts, social democrats have to be at the forefront of putting greater power in the hands of people.
The purpose of mutualism in advancing a new form of social democracy is to combine an emphasis on collectivism and social justice with pluralism and a more equal distribution of power. The Left has to recognise that change can be instantiated from the bottom-up through local innovation, experimentation and a culture of ‘disciplined pluralism’, rather than merely top-down through the centralising bureaucratic state. This is the case as much in the financial economy as in the organisation and structure of public services. Social democrats in Europe are the heirs of a pluralist tradition encapsulated by Robert Owen, Charles Fourier, Thomas Paine and Pierre-Joseph Proudhon which champions the diffusion of property rights and economic control, spreading power as widely as possible. It has never been more relevant, indeed urgent, than today.
Patrick Diamond is Visiting Fellow at the Department of Politics & International Relations and Nuffield College, University of Oxford.
All these -isms are getting blurred. This sounds rather like what others call “market socialism” or “economic democracy”. Many other buzzwords exist. Of late “economic democracy” seems to become the prefered term, particularly in the USA.