The evidence of our broken
economic model mounts. This week, the East Coast Mainline was taken
back into temporary public control from Stagecoach and Virgin Trains.
As a potent symbol of the failure of rail privatisation, where franchise operators
win regardless of their performance but the costs are borne by passengers and
taxpayers, it is striking. At the same time, Royal Mail year end results saw
another record
dividend payment to shareholders, with almost a billion pounds
extracted from the company since privatisation, despite the sale promising
increased inward investment. Meanwhile, the Business, Energy and Industrial
Strategy Committee released a devastating
report into the failings of Carillion, exposing the flaws of the
outsourcing model.
Parasitic, over leveraged,
weakly accountable, and delivering little value, these companies and their
relationship to the state epitomise the inefficiencies and inequalities of our
neoliberal political economy.
Critically, these are not
isolated symptoms of failure. We are in the middle of the longest stagnation in
earnings for 150 years. Average weekly earnings have decoupled from GDP growth
for the first time since comparable data has been available. Young people are
set to earn less than the previous generation for the first time. We have the
richest region in Europe – inner London – but most British regions are poorer
than the European average. The UK’s productivity performance has been abject
for a decade. The cumulative environmental impacts of our economy are damaging
and unsustainable. In short, our economic model is broken and needs radical
reform.
Piecemeal tinkering won’t
suffice. What is required is an urgent rethinking of how our economy is
organised, and in whose interest. Fundamental to this must be an ambitious new
agenda on ownership, one that isn’t satisfied with the piecemeal
nationalisation of railway franchises, or indeed the railway system as a whole,
but instead seeks to transform how our economy as a whole is owned and
governed, and in whose interests.
Scaling up alternative models
of ownership – new ways of owning and governing enterprise to give workers and
communities a stake and a say – is critical. This is because ownership is the
key to unlocking systems change. Indeed, we cannot achieve the paradigm shift
we need in how we run the economy and for whom without changing how our
economic assets and institutions are owned. From the post-war consensus
undergirded by the nationalisation of the economy’s commanding heights, to the
role privatisation played in shattering of the Keynesian settlement and
popularising Thatcherism, history teaches us ownership matters.
The reason is because
ownership of capital shapes the distribution of power and reward in a business
and the economy as a whole. It structures how enterprise is organised, granting
powerful control rights to the exclusion of labour’s interest. Ownership also
generates income rights, which as capital’s share of national income has risen
over time, has benefited business owners at the expense of the incomes of workers.
If capital was broadly owned
or democratically governed, the growing share of national income going to
capital would not matter for inequality and living standards, since the
benefits would be widely distributed. In fact, the ownership of capital is highly
unequal. The wealthiest 10 per cent of households own 45 per cent of the
nation’s wealth, while the least wealthy half of all households own just 9 per
cent. Property, the most widely spread form of wealth, gives people little
control over the productive forces of the economy. Financial wealth which does,
including stocks and shares, is particularly unequally held: the wealthiest 10
per cent own almost 70 per cent. Indeed, a striking paradox of the ‘shareholder
democracy’ revolution of the 1980s was that it led to the concentration, not
dispersal, of economic ownership. Compared to most other advanced economies the
UK now scores poorly on economic
democracy indexes measuring ownership and economic voice.
Powerful trends are set to increase
the importance of ownership in the context of unequal levels of ownership.
Technological change risks creating a paradox of plenty: society is likely to
be far richer overall due to the material abundance generated by automation and
digitalisation, but for many individuals and communities, technological change
could reinforce inequalities of power and reward as the benefits are narrowly
shared, flowing mainly to capital owners and the highly skilled. From the
ownership of data that fuels the platform giants of surveillance capitalism, to
‘who owns the robots’, ownership of capital will become ever-more pivotal.
This is why IPPR’s Commission
on Economic Justice has set out a radical agenda for broadening and
democratising ownership of business equity. The goal of our proposals are
two-fold: to give everyone a share of capital, both as useable wealth and for
its income returns; and to spread economic power and control in the economy, by
expanding the decision rights of employees and the public in the management of
companies.
Our report, Capital
Gains, proposes three mechanisms that can help broaden the ownership of
companies and spread economic rewards and power more widely.
First, we propose establishing
a Citizens’ Wealth Fund that would own shares in companies, land and other
assets on behalf of the public as a whole, and pay out a universal capital
dividend of £10,000 for every 25-year old.
Second, we propose a series of
measures to expand employee ownership trusts, which create a form of employee
common ownership that provides the basis for employee participation in both
profits and corporate governance, giving employees both distributional and
control rights. The effect is to turn the traditional company ownership
hierarchy on its head: whereas capital normally hires labour, in an EOT-owned
company the employees hire capital. We estimate that the UK could create 3
million worker-owners by 2030 with an ambitious reform agenda.
Finally, we set out steps to
scale the co-operative and mutual sector, which are democratically owned and
governed, through new financial and legal measures to support forms of
enterprise in common.
Our crisis consists in the
mounting evidence of deep structural failure, whether Carillion or the rail
debacle, without yet generating overwhelming momentum towards much needed and systemic
reform. An alternative ownership agenda must be critical to this.
From the national to the firm
level, new models of ownership can begin to reshape how our economy works and
for whom. It gives us a chance to own the future.
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