Monday, August 20, 2007


Co-ownership a Better Solution than Socialism

I wonder what Robert Tressell would make of John Lewis partners? Students of socialism will know that this is the man who wrote The Ragged Trousered Philanthropists in 1914. I still use his illustration of inequality when teaching the origins of socialism: two thirds of all wealth goes to the numerically tiny great owners of property, financiers, capitalists and shareholders, while one third is shared out between the masses of workers who actually create wealth in the first place.

Today we learn that £100 invested in employee owned firms in 1992 would have been worth £349 in 2003, while the same sum invested in the FTSE all share index would have returned a mere £161. John Lewis is a shining example of how giving workers a direct share of the business can improve performance. Anyone visiting the one of the 26 stores(not to mention a clutch of other businesses) owned by its 68,000 employees will know why it turned over £6bn last year.

The stores are beautifully laid out an well stocked with excellent catering services but the key factor is the superb service one receives from polite, helpful and well informed employees; the contrast with other businesses is remarkable-hence the difference in profitability. This year profit was £319m and partners(i.e. staff) received and 18% bonus, the equivalent to nine weeks full pay. OK, from certain left-wing viewpoints, it's maybe not a totally fair return for work invested, but for most wage slaves, it would do.

The Employee Ownership Association carried out a survey in 2005 that revealed that 72% thought staff worked harder under a co-ownership structure, 81% said they took more responsibility, 49% thought competitiveness was enhanced and 44% confirmed profits were higher.

It's a pity that co-owned companies represent only 2% of the economy as it makes for happier workforces and better performance, as Patrick Burns, Executive Director of the EOA asserts:

You get a remarkable level of employee involvement and people are prepared to go the extra mile. People feel their companies are more productive, and the companies are very sustainable,".

And Director of personnel at the John Lewis Partnership, Tracey Killen adds:

The great strength of the partnership's model is that employees have a real stake in the business ... co-ownership allows the partnership to take a long-term view, because we do not have to answer to external shareholders who are usually seeking quick returns."

I commend the linked article to anyone interested in this topic. Tressell offers a vision of a socialist society in his book: the nationalisation of land,railways and most forms of production, the ending of unemployment, the abolition of a (because now redundant) police force, equal pay, good homes for all, the reduction of the working day to 4-5 hours and the ending of military conflict worldwide. Co-owned enterprises might sound like a prosaic substitute for such an agenda, but they provide a pragmatic solution to the problem of a fair return for labour which clearly works. I hope it can flourish and eventually maybe match the more dominant model which still offers closer resemblance to the one Tressell hated so passionately a hundred years ago.

Co-operatives like John Lewis put in to practice the essential message of economics: that people respond to incentives. Staff are consequently "polite, helpful and well informed". In the main I'd agree with this analysis, although I'm not quite sure how the free-rider problem is overcome - perhaps lax employees are motivated by peer pressure, or perhaps employees can easily be stripped of partner status if they're not performing.

But there are bad points to contend with: as I understand it, employees only become partners after a year or so of full-time service. Running a company on a seniority principle at the possible expense of meritocracy can be demoralising for new recruits, not to say damaging for overall returns.

John Lewis's extensive social programme (country estates, yachts, holiday villas) is good for established partners (particularly fun-loving sailing types), but not so good for newer recruits and the unemployed. Continental Europe provides a case in point: employees at, say, an Audi factory in Germany are lavished with healthy pensions and long holidays, but this is a slap in the face for the 5 million of Germans who are out of work.

Giving employees a more tangible stake in their place of work is a good idea, but creating a rigid hierarchy to meet this end is not necessarily the way forward. Co-operatives may actually run counter to the socialistic idea of opportunity for all.
Co-operatives are not socialist as such. They are businesses. Thay may be better businesses for workers than other forms. On the other hand they may be just as bad or indeed worse. And I have worked in and with co-operatives that are worse in many aspects. Almost unconscionable from a socialist point of view.

And I am findying the small business nimbyism of Unicorn re a possible mini-Tesco nearby hilarious, much as I genuflect and pray at their church of wholefoodness and unprocessed sweeteners.

JLP is not really a Co-Op is it though??
Not really, it's a co-owned business without the extensive check list of things the Rochdale Pioneers wished for but it's a damn sight better than Tesco n'est ce pas?
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