The Real News on Labour’s Plan For Nationalisation and Workplace Democracy

In this 15 minute video from the Baltimore-based The Real News network, host Aaron Mate talks to Leon Panitch, professor of political science at York University about the proposals announced at the Labour party’s conference last month that Labour intended to renationalize some of the privatized utilities, introduce profit-sharing schemes and workplace democracy in firms with over 250 members, in which 1/3 of the board would be elected by the workers.

The video includes a clip of John McDonnell announcing these policies, declaring that they are the greatest extension of economic democratic rights that this country has ever seen. He states that it starts in the workplace, and that it is undeniable that the balance of power is tipped against the worker. The result is long hours, low productivity, low pay and the insecurity of zero hours contracts. He goes on to say that Labour will redress this balance. They will honour the promise of the late Labour leader, John Smith, that workers will have full union rights from day one whether in full time, part time or temporary work. They will lift people out of poverty by setting a real living wage of ten pounds an hour.

McDonnell also says that they believe that workers, who create the wealth of a company, should share in its ownership and the returns that it makes. Employee ownership increases productivity and improves long-term decision making. Legislation will be passed, therefore, for large firms to transfer shares into an inclusive ownership fund. The shares will be held and managed collectively by the workers. The shareholders will give the workers the same rights as other shareholders to have a say over the direction of their company. And dividend payments will be made directly to the workers from the fund.

Commenting on these proposals, Panitch says that in some ways they’re not surprising. McDonnell stated that Labour would inherit a mess. But his remarks were different in that usually governments use the fact that they will inherit a mess not to go through with radical policies. Panitch then talks about Labour’s commitment to bring the public utilities – rail, water, electricity, the post office – public ownership, pointing out that these used to be publicly owned before Thatcher privatized them. McDonnell particularly focused on water, before going beyond it, citing the 1918 Labour party constitution’s Clause IV, which Blair had removed. This is the clause committing the Labour party to the common ownership of the means of production, distribution and exchange, under the best form of popular administration. And unlike previous nationalized industries, these will be as democratically-run as possible. Councils would be set up in the water sector made up of representatives of the local community and workers’ representatives to be a supervisory council over the managers in the nationalized water industry.

They then go to a clip of McDonnell talking about the nationalization of the utilities. McDonnell states that the renationalization of the utilities will be another extension of economic democracy. He states that this has proved its popularity in opinion poll after opinion poll. And it’s not surprising. Water privatization is a scandal. Water bills have risen by 40 per cent in real terms since privatization. 18 billion pounds has been paid out in dividends. Water companies receive more in tax credits than they pay in tax. And each day enough water to meet the needs of 20 million people is lost due to leaks. ‘With figures like that’, he concludes, ‘we cannot afford not to take it back into popular ownership’.

Mate and Panitch then move on to discussing the obstacles Labour could face in putting these policies into practice, most particularly from the City of London, which Panitch describes as ‘the Wall Street of Britain’, but goes on to say that in some ways its even more central to financialized global capitalism. However, Panitch says that ‘one gets the sense’ that the British and foreign bourgeoisie have resigned themselves to these industries being brought back into public ownership. And in so far as bonds will be issued to compensate for their nationalization, McDonnell has got the commitment from them to float and sell them. He therefore believes that there won’t be much opposition on this front, even from capital. He believes that there will be more resistance to Labour trying to get finance to move from investing in property to productive industry.

He then moves on to talk about Labour’s plans for ten per cent of the stock of firms employing 250 or more people to go into a common fund, the dividends from which would passed on to the workers up to 500 pounds a year. Anything above that would be paid to the treasury as a social fund for meeting the needs of British people and communities more generally. Panitch states that this has already produced a lot of squawking from the Confederation of British Industry. Going to giving workers a third of the seats on the boards, Panitch states that it has already been said that it will lead to a flight of capital out of Britain. He discusses how this proposal can be radical but also may not be. It could lead to the workers’ representatives on these boards making alliances with the managers which are narrow and particular to that firm. The workers get caught up in the competitiveness of that firm, it stock prices and so on. He makes the point that it’s hardly the same thing as the common ownership of the means of production to have workers’ sitting on the boards of private companies, or even from workers’ funds to be owning shares and getting dividends from them. Nevertheless, it is a step in the right direction of socializing the economy more generally, and giving workers the capacity and encouraging them to decide what can be produced, where it’s produced, and what can be invested. And if it really scares British and foreign capital, this raises the question of whether they will have to introduce capital controls. Ultimately, would they have to bring the capital sector into the public sphere as a public utility, as finance is literally the water that forms the basis of the economy?

Mate then asks him about Labour’s refusal to hold a second referendum on Brexit, which angered some activists at the conference. Labour said that any second referendum could only be about the terms of the exit. Panitch states that people wanting Britain to remain in a capitalist Europe try to spin this as the main priority of the party’s members, even Momentum. He states that this is not the case at all, and that if you asked most delegates at the conference, most Labour members and members of Momentum, which they would prefer, a socialist Britain or a capitalist Europe, they would prefer a socialist Britain. The people leading the Remain campaign on the other hand aren’t remotely interested in a socialist Britain, and think it’s romantic nonsense at best. He states that the Corbyn leadership has said that they want a general election as they could secure an arrangement with Europe that would be progressive without necessarily being in Europe. They would accept the single market and a progressive stand on immigration rather than a reactionary one. They did not wish to endorse a referendum, which the Tories would have the power to frame the question. And this is particularly because of the xenophobic and racist atmosphere one which the initial Brexit vote was based. Panitch states that he is a great critic of the European Union, but he would have voted to remain because the debate was being led by the xenophobic right. He ends by saying that capital is afraid of the Trumps of this world, and it is because of the mess the right has made of things here in Britain with the Brexit campaign that capital might give a little bit more space for a period at least to a Corbyn government.

This latter section on Brexit is now largely obsolete because Labour has said it will support a second referendum. However, it does a good job of explaining why many Labour supporters did vote for Brexit. The editor of Lobster, Robin Ramsay, is also extremely critical of the European Union because of the way neoliberalism and a concern for capital and privatization is so much a part of its constitution.

Otherwise, these are very, very strong policies, and if they are implemented, will be a very positive step to raising people out of poverty and improving the economy. Regarding the possibility that the representatives of the workers on the company boards would ally themselves with capital against the workers, who put them there, has long been recognized by scholars discussing the issue of workers’ control of industry. It was to stop this happening that the government of the former Yugoslavia insisted that regular elections should be held with limited periods of service so that the worker-directors would rotate. Ha-Joon Chan in his books criticizing neoliberal economics also makes the points that in countries like France and Germany, where the state owns a larger proportion of firms and workers are involved in their companies through workers’ control, there is far more long-term planning and concern for the companies success. The state and the workers have a continuing, abiding interest in these firms success, which is not the case with ordinary investors, who will remove their money if they think they can get a better return elsewhere.

My concern is that these policies will be undermined by a concentrated, protracted economic warfare carried out against the Labour party and the success of these policies by capital, the CBI and the Tories, just as the Tories tried to encourage their friends in industry to do in speeches from Tweezer’s chancellors. These policies are desperately needed, but the Tory party and the CBI are eager to keep British workers, the unemployed and disabled in poverty and misery, in order to maintain their control over them and maximise profits.

Another Crisis in the Outsourcing Industry: Capita Now in Trouble

Yesterday, Mike reported on his blog that the outsourcing giant, Capita, was now in trouble. Its share price has apparently halved, knocking £1.1 billion of its stock market value. It has axed its scheme to issue £500 million in dividends to its shareholders. Instead, it intends to raise £700 million, partly by selling off parts of the company, which it needs to balance the books. There are also fears that it will make part of its 67,000 strong workforce redundant as well as concerns for the firm’s pension fund.

Mike in his article notes that the company was responsible for assessing the infamous fitness for work tests, for which the government has imposed hidden targets. One of these is that 80 per cent of reconsidered cases should be turned down. Mike therefore comments that if the crisis means that some of these assessors get a taste of what they inflicted on benefit claimants, this would be a case of poetic justice. He also wonders what the firm was doing when it devised the scheme to issue those massive dividends to its shareholders. Did they believe that the government’s magic money tree would continue to allow them to give heaps of money to their rich shareholders? He also asks other searching questions, such as whether it was deliberately underbidding to get government contracts, and then using the money to help finance those projects it had already won.

Mike concludes

So: First Carillion collapsed. Now both Interserve (remember them?) and Capita are in trouble.

Who’s next? And what will happen to public services while the Tories dither over this crisis?

See: https://voxpoliticalonline.com/2018/01/31/in-the-crap-ita-government-contractor-responsible-for-benefit-assessments-is-in-deep-financial-doo-doo/

Capita, or as Private Eye dubbed it, ‘Crapita’, has a long history of incompetence behind it. Way back in the 1990s it seemed that hardly a fortnight went by without Capita turning up in the pages of the satirical magazine. And the story was nearly always the same. The outsourcing company won a government or local authority contract to set up an IT system or run IT services. The project would then go over time and over budget, and would be massively flawed. And then a few weeks or months later, the company would be given a contract somewhere, and do exactly the same thing there.

You’re left wondering how Crapita kept winning those contracts, when it was so manifestly unfit to carry them out. Who did it have on its board? Or was there a deliberate policy by Major’s government to support outsourcing, no matter how inefficient and incompetent they were, because it was private enterprise and so preferred and supported for purely ideological reasons?

In any case, what seems to have placed the company in a very precarious financial situation is the usual tactics of big companies in this stage of capitalism: award massive dividends to the shareholders. This usually goes along with starving the rest of the company of investment, which seems to have been done to. And granting massive, and massively unsustainable pay awards to senior management. There’s no mention of that in Mike’s article, but I don’t doubt that this was done too. I’ve got the impression that it’s just about standard practice across a huge swathe of industry.

This is a financial strategy that has driven far more than one company to the wall. I also wonder if the executives weren’t also trying deliberately to create a debt, so that they could dodge corporation tax for five years. This is one of the tricks Stewart Lansley and Joanna Mack describe in their book on contemporary British poverty, Breadline Britain.

Over the years the outsourcing policy has been in operation, there’s been one crisis after another. The outsourcing companies have repeatedly shown themselves to be incompetent, not just in the case of capita, but also notoriously with G4S and the scandals over the violence and brutality it meted out towards asylum seekers in the detention centres it ran. And, of course, when a whole load of prisoners escaped on their way to court. Or jail.

Private industry has repeatedly shown that it is incompetent to do the work of the state sector. These firms have the disadvantage of having to make a profit for their shareholders, as well as the demands of their management for multi-million pound pay packets. The only way they can afford this is by cutting wages to their workers, and spending as little as possible on the service they are meant to be providing. The result of this has been a series of financial collapses. Carillion was the first. Now Capita and Interserve, another outsourcing company, is in similar trouble.

The only sensible recourse should be to cancel these companies’ contracts, and take everything back in-house. But this won’t be done. I think there’s a problem in that the state sector has been so decimated by the past four decades of Thatcherism, that it no longer has the capacity to run these services itself. There’s also the additional problem that too many politicians and media magnates have connections to these companies, or to firms in a similar position hoping for government contracts. Acknowledging that outsourcing was a failure would damage the interests of these politicos and press barons. There’s also the challenge of actually facing up to the fact that a central plank of Thatcherite dogma – that private enterprise is always more efficient than the state – is absolutely, undeniably wrong. Anybody who makes this point is denounced as a Communist in screaming headlines. You only have to look at the way the Tory press has vilified Jeremy Corbyn for daring to want to renationalise the NHS, the electricity net and the railways. His policies are very far from the total nationalisation demanded by Communists and Trotskyites, but you wouldn’t know it from the frothing abuse hurled in his direction by the Tories and Blairites.

There’s also another problem with calling an end to the outsourcing scam. PFI contracts and outsourcing allow some of the costs to be written off the official government accounts sheet. They’re still there, and we have to keep paying them, but they’re not included in the official figures. It’s why Mussolini used a similar scam when he was Duce of Fascist Italy. Any government that restores these projects to the way they were handled before risks putting millions back the official figures. And if that’s the Labour party, you can imagine the Tories making their usual hackneyed and untrue comments about ‘high-spending Labour’, and then re-iterating the spurious arguments for austerity.

I’ve no doubt that the government will do what it can to shore up the current mess the outsourcing companies are in. But the collapse of Carillion and now the severe financial troubles faced by Capita and Interserve show that outsourcing does not work. And given these companies’ highly checkered history, they should never have been given governments to begin with.

And it bears out exactly the description the author of Zombie Economics used for them in the very title of his book. Outsourcing, and the rest of the Thatcherite economic strategy of privatisation, wage restraint, low taxation and declining welfare are ‘zombie economics’ as they don’t work, but haven’t yet been put it into the grave.

It’s high time they were, and Thatcherite free trade capitalism was abandoned as the failure it so glaringly is.

Fabian Pamphlet on the Future of Industrial Democracy: Part 2

This is the second part of my article on William McCarthy’s Fabian pamphlet, The Future of Industrial Democracy, published in 1988.

The section on Ideas in chapter 3: Composition and Principles of Representation runs as follows

At this stage all one can do is propose a number of suggestions and options for further consideration by the Movement. I therefore advance the following cockshy in an attempt to start a debate. No doubt it fails to grapple with many of the problems and oversimplifies others. It should be regarded as written with the lightest of pencils. Three ideas come to mind.

First, why not retain the Bullock notion of a universal enabling ballot, to test whether workers in a given firm or establishment wish to exercise their statutory rights to participation? As the Bullock Report recognised unions would retain the right to “trigger” such a ballot in the groups they represented. Well-intentioned employers, in association with recognised unions, could agree to recommend the establishment of such statutory councils; but there would be a need to be a ballot of all workers involved.

Where a majority of workers voting favoured the establishment of participative rights the employer would be under a legal obligation to establish statutory joint councils. The composition of the workers’ side would be broadly defined by statute, as would be their powers and right. Management would be free to decide its own representatives who served on the council, but the statute would specify the obligations of the employee.

Second, why not let worker representatives emerge by means of a universal secret ballot-open to both unionists and non-unionists-with recognised unions enjoying certain prescribed rights of nomination? Here there a considerable number of European examples to choose from. In France and Luxembourg as I understand it, only unions can nominate for the “first round” of elections. If less than 50 per cent of the electorate vote there is a second election and any worker can nominate. In Belgium unions have an exclusive right to nominate “lists” of candidates where they have representative rights; non-unionists may make nominations elsewhere. Alternatively, there are systems where a given number of workers can nominate if unions fail to provide sufficient nominations. In the Netherlands, for example, any thirty workers can nominate in the larger enterprises, if unions fail to do so. In Germany any three workers can put up a candidate. For myself I favour certain limited rights of nomination in cases where unions are recognised. This is the area where the spectre of “company unionism” is most easily perceived and rightly resisted.

Third, why not specify that in areas where unions can demonstrate that they have members but no recognition any “appropriate” union has the right to make nominations? This need not prevent a given number of workers from enjoying analogous rights.

The section on Legal Framework also says

The best possible combination of nomination and electoral arrangements needs further thought than I can give it as this point. What I believe is that given suitable arrangements it would be possible both to safeguard the position of established unions and create conditions favourable to trade union growth; yet it would not be necessary to insist on a quasi-monopoly of representative rights confined to recognised unions. I suggest that after further debate within the Movement, Labour should propose an enabling statute which provides for joint participation councils in all private firms employing more than 500. The figure of 500 is itself open to debate. But in this way, I estimate it would be possible to show that the intention was to provide participation opportunities for something like 50 per cent of the private sector labour force. A worthwhile beginning to further advance, based on experience and proven worth. Where it was evident that a company employing more than 500 was divided into more than one “establishment” or was composed of a group of companies under the overall control of a “holding company” or its equivalent, power would exist to demand additional joint councils, with rights related to decisions taken at appropriate management levels.

Consideration would need to be given to the creation of a similar framework of rights in appropriate parts of the public sector of employment. So far as I can see there is no good reason why workers in the nationalised industries, national and local government or the NHS should be deprived of statutory rights to participate in management decisions affecting their working lives. No doubt the representation of “management” will pose different problems, the appropriate levels of joint councils will need to be tailor-made to fit different parts of the public sector and there will be different problems of confidentiality. But I doubt if the needs of workers and the benefits to both employers and the public will be found to be all that different.

It will be said that this cockshy for further consideration is superficial, with several critical problems and difficulties left unresolved. Those who like its general drift, but feel fear that the sceptics may have a case, could not do better than look again at some of the less publicised parts of the Bullock Report. One of the more lasting services performed by the Committee of Inquiry was that it set out to explore and overcome almost all the practical objections that could be raised to any form of statutorily based workers’ participation (see Bullock op. cit. chapters 11 and 12).

For this reason its says wise and relevant things about the need to avoid allowing all kinds of exceptions to a participation law, based on the alleged differences that are said to exist in banks, shipping lines, building firms and other parts of the private sector where employers would like to escape the effect of legislation. It also provides a clear account of the problem of “confidentiality” and how best to deal with it. It makes a convincing case for an Industrial Democracy Commission (IDC) to administer and apply the legislation and monitor its effects in an objective and impartial way. (In our case an additional essential task for the IDC would be to decide when multi-level joint councils were justified in the case of a particular firm or group of firms.) Above all, perhaps, it provides a guide through the complexities of company structure-with its spider’s web of holding boards, subsidiary boards, parent companies, inter-locking “subsidiaries” and “intermediate” organisations. It even follows these labyrinth paths into the upper reaches of British and foreign-based multi-nationals.

Of course the Committee’s primary objective in tracing out the lines of corporate responsibility and influence was to decide how to apply its own benchmark of “2,000 or more employees”. After much consideration they decided that this should apply “…to the ultimate holding company of a group which in toto employs 2,000 or more people in the United Kingdom, as well as to any individual company which employs 2,000 or more people in the United Kingdom, whether or not it is part of a group” (Bullock, op. cit. p. 132).

With appropriate emendation to fit the lower thresholds advanced in this pamphlet the Bullock formula seems to me to provide the essence of the right approach.

It is also important to remember that the legal framework advanced above would its place alongside Labour’s overall programme for extending rights at work-eg the restoration of trade union rights, improved rights of recognition and an expansion of individual rights against employers in cases of unfair dismissal and discrimination. All British workers would gain from such a programme and good employers should have nothing to fear.

The proposals should also be seen against the background of the first report of the Labour Party National Executive Committee’s People at Work Policy Review Group, with its emphasis on the need for a new training initiative and action to raise economic efficiency and the quality of life at work.

A legal framework of the kind envisaged here would provide trade unions and trade unionists with unrivalled opportunities. In areas where unions were recognised union representatives would find it easier to service members and influence the decisions of management. In areas where non-unionism is now the norm there would be greater incentives to organise and recruit; it would be easier to demonstrate what unionisation could do and easier to move to a situation in which recognition became a natural development. Of course, unions and their workplace representatives would need to become experts in explaining and using the rights embodied in the new framework. There would be a need for professional and prompt guidance and support in local and national union offices.

Unions should also find it easier to tackle their media image as negative and reactionary forces-opposed to the narrow “consumerism” peddled by the Government and its allies: engaged in a perpetual battle against management-inspired improvements in productivity and efficiency. In time, and before very long, it should be possible to demonstrate the contribution which can be made by the right kind of alliance between management, workers and unions. Benighted market men and women can be relied upon to misunderstand and misrepresent any teething problems and difficulties that arise; but for trade unionists of all sorts and persuasions there will be very little to lose and a great deal to gain.

This article will conclude in Part 3, which will discuss the pamphlet’s last chapter, Summary and Conclusions.

RT: McDonnell States Labour Will Take Back Rail, Water, Energy and Royal Mail

I’m giving this clip from RT’s coverage of the Labour party conference a massive thumbs-up. It’s a short clip of McDonnell stating that they intend to back rail, water, energy and the Royal Mail to give them to the people, who actually use and work in them. They aim to save the country and industry from the Tories’ mixture of belligerence and incompetence. And their commitment to a fairer society does not end at Dover. Just as they want a Britain for the many, and not the few, so they want a Europe for the many and not the few. This means, while respecting the results of the Brexit referendum, they will be working with our European partners during the transition period. And they will stop the Tories’ brutal treatment of immigrants.

Now we’re going to hear the screams and angry wailing from the neoliberals – the Tories, the Lib Dems and the Blairites. They’ll all start ranting now about how this is just discredited ‘Trotskyism’, that will wreck the wonderful, strong economy nearly four decades of Thatcherism has created. And, of course, the Tories, whose cabinet is stuffed with toffs and millionaires, will immediately start claiming that it will make working people poorer.

It’s none of these things. It’s good, solid, traditional Labour policy. The type of policies that gave this country decades of economic growth and higher standards for working people after the war. This was a Labour party that ensured that there was a real welfare state to look after the poor, that unions did represent the working man and woman against exploitation by their employer, and that an increasing number of young people could go on to uni without worrying about acquiring tens of thousands of pounds of debt at the end of it.

And if Labour does, as I fervently hope, renationalize those industries, I would very much like a form of workers’ control implemented in them. One reason why the Tories were able to privatize these industries was because, when Labour nationalized them after the Second World War, the party was too timid in the form nationalization took. The state took over the ownership of these industries, but otherwise left the existing management structures intact. This disappointed many trade unionists and socialists, who hoped that nationalization would mean that the people, who actually worked in these industries would also play a part in their management.

I’ve no doubt that if such plans were drawn up, all you’d hear from the Tories and the other parties would be yells about surrendering to the union barons, along with Thatcherite ravings about the Winter of Discontent and all the other trite bilge. But as May herself promised that she would put workers in the boardroom – a policy, which she had absolutely no intention of honouring – the Tories can’t complain without being hypocritical.

As for the power of the trade unions, as Russell Brand points out in his piece attacking Rees-Mogg, most of the people now relying on food banks are the working poor, whose wages aren’t enough to stave off starvation. And one of the reasons why this is so is that the Tories and then the Blairites have done everything they can to break and destroy the unions, so that the owners of industry can pay the workers a pittance and sack them at will.

And the Tories are treating immigrants brutally. We’ve send them send the vans around and put up posters telling immigrants to hand themselves in. And there have been outbreak of violence at the detention centres for asylum seekers again and again because of racist violence and bullying by the outsourcing companies running, like Serco, or G4S or whoever. And this is quite apart from the sheer racist venom spouted by the Tory press – the Heil, Scum, Express and so on.

This is a fine speech with excellent policies. Policies that hopefully put an end to four decades of Thatcherite misery, poverty and exploitation.

Vox Political: The Cooperative Party Fighting Back against New Labour Infiltration?

Mike today has posted up an interesting little piece about the Cooperative Party’s plans to develop some distinctive policies of its own. The party has been allied to Labour since 1927, and has 25 MPs elected on a joint ticket. Gareth Thomas, the MP for Harrow West, who chairs the party, has said that the party will be developing its own distinctive policies ahead of centenary next year in 2017. Among the policies suggested is the representation of carers on the boards of companies providing social care services, and that the care workers for those companies should be able to take over those companies if they’re going to close or change hands. Mike comments that these are excellent policies.

The party has also stated that it is staying neutral in the leadership contest, and has rejected the idea that it is going to be infiltrated by right-wing Labour MPs, who want to split away and turn it into a vehicle for their own campaign against Jeremy Corbyn. Mike comments that the policies look like they’re deliberately formulated as part of a backlash against attempts by the Blairites to take over the party. He is, however, sceptical about how neutral it really is in the leadership contest. He asks how many of its MPs signed the letter supporting Owen Smith.

Mike’s piece is at: http://voxpoliticalonline.com/2016/09/09/is-co-operative-partys-new-stance-a-backlash-against-new-labour-takeover-bid/

G.D.H. Cole in the 1940s wrote a massive history of the cooperative movement, A Century of Cooperation. It’s astonishing now, after the co-op has largely turned itself into a mainstream supermarket, how revolutionary co-operatives were, and how deeply ingrained they were as part of working class life. In their time, they were seen as a genuinely revolutionary movement that would superseded capitalism. The vast majority of co-operatives were retail, but producers’ cooperatives, in which the workers also had a share in management, also existed. I think all workers should have the opportunity to take over and run failing companies, just as a few were given such power way back in the 1970s by Labour party. A few years ago I reblogged a video on the way the Argentinian economy was partly saved by its workers taking over failing economies, with comments by the veteran American radical, Naomi Wolf. Since then, most have returned to being normal capitalist enterprises. Nevertheless, the success of these companies does show that workers also can be good managers.

Co-determination and Workers in the Boardroom in Germany

Elections for the Factory Council in Germany

I’ve posted up a few pieces about industrial democracy and worker’s control in Yugoslavia and in the former Soviet Union under Lenin. Capitalist West Germany also has a similar system of co-determination in which members of the workforce are represented in the boardroom in a system of factory councils, thus creating the ‘constitutional factory’.

The system is described in the book, Tatsachen Uber Deutschland: Die Bundesrepublik Deutschland (Facts about Germany – The Federal Republic of Germany’) (Munich: Bertelsmann 1985). This is my translation of some of the relevant passages.

…..

Human self-determination is indisputably valid as the foundation of our social order. It results from the constitutional guarantee of the right to the free development of the personality. It would contradict this image of self-determined people, to regard the worker merely as a component of a system of production, who is solely determined by the interests of capital. Starting from this basic thought, he far-reaching unity exists today that that the aims of the enterprise must be stamped with the interests of the working people, and that the workers’ democratic say in the matter must be heard, when the entrepreneur’s decisions, touch on their vital interests. It has been attempted to do justice to these demands and concede to the workers, legally secured, a considerable measure of co-determination in the factory.

The factory council law of 1920, that first created this possibility of setting up elected representatives of workers and employee in all factories, stood at the beginning of this development. The young Federal Germany made a great step in the direction of employee co-determination in 1951, when it set in force the so-called ‘Coal, Iron and Steel Co-Determination Law’, which granted employees in the large enterprises of the coal, iron and steel industries considerable rights to co-determination, as well as the co-staffing of the organs of management. The Factory Constitutional Law of 1952 provided the employees of nearly all industries co-determination rights in nearly all factories in social and personal matters, and a hearing with in economic decisions. The second factory constitutional law of 1972 brought substantial improvements, above all for the employees’ representatives. This was considerably reformed in the comprehensive co-determination law of 1976. With all these laws the idea of the ‘constitutional factory’, which still appeared as a utopian dream a few decades ago, becomes a reality in the Federal Republic of Germany. The Basic Law’s principle of the social state is filled with life in an important area.

The Factory Council

the most important arrangement for the representation of the employees’ interests in the factory is the factory council. It is elected by all employees over 18 years old. Foreign employees are also entitled to vote and be elected. Everyone entitled to vote can equally stand as a candidate, whether or not they belong to a union. In practice, however, and above all in the larger factories, the unions have a considerable influence in the composition of the candidate lists. The number of members of the factory council is determined by the size of the enterprise. Its term of office lasts three years. As an employer could be tempted to dismiss an ‘uncomfortable’ member of the factory council, the members of the factory councils enjoy a stronger level of protection from dismissal during their time in office and for a year afterwards. The members of the factory council normally practice their office outside of their professional work. Only in the larger factories must a member or several members of a factory council be exempted from their professional activities.

The officials, employees and workers of the Civil Service equally have a representation of their interests, the personal council, whose tasks and powers resemble those of the factory council.

The Rights of the Factory Council

The factory council has multiple rights, above all in social and personal matters. In some things it must be heard, in others it can co-operate, and in some particular matters it finally has a real right of co-determination. ‘Real’ co-determination means that the employer cannot make decisions without the agreement of the factory council. If they cannot come to terms, an agreement office makes the decision, put together from equal numbers of the representatives of employers and the factory council as well as an impartial president.

Without the agreement of the factory council, the firm’s management are not allowed, for example, to arrange any overtime, short-time work, control clocks or introduce other control equipment, issue contract or premium rules, and give notice to vacate company accommodation. The factory council can even compel vacated or newly created positions to be first advertised within the factory.

The factory council cannot stop the dismissal of a fellow worker. They must be heard before every dismissal, and have a right to reply within certain limits. If they reply and themselves make a complaint, they are to be employed until the tribunal’s decision. If the employer plans the dismissal of a large number of workers, they must inform the factory council in time. This then has the right to demand the drawing up a ‘social plan’, that ameliorates the negative aspects for those affected. For example, a settlement, or the costs of removal, would be paid to them.

Also, where the factory council only has a right to a hearing, it can very frequently achieve improvements for the workers through skilful negotiation. In practice the factory council and the employer only rarely stand opposed as irreconcilable opponents, but work together, as the law expressly demands – and strive for sensible compromise.

The individual employee, apart from their electoral rights to the factory council, has rights, which could be called the ‘Innerfactory Basic Rights’. They have the right above all to be informed of the type of job and the arrangements for the termination of work; to demand information on the remuneration of work and the calculation of wages; to inspect their personal acts; and to complain if they feel discriminated against or unjustly treated. In most cases the employee is allowed to draw on a member of the factory council.

Co-determination in Large Factories

The factory council has no influence on the economic management of the enterprise. It is above them only in having a certain compass to inform, and only that in factories with over 100 employees.

There is, however, economic co-determination in various forms in almost all big factories. In the German Federal Republic more than half of large enterprises are joint-stock companies. German joint-stock companies have two management premiums: the supervisory board as supervisory organ and the board of directors, which conducts current business. From 1951 onwards a third of the members of the supervisory board in every joint-stock company must be elected representatives of workers and employees. This rule is valid for small and medium joint-stock companies (up to 2,000 employees), and also today in certain other legal forms for enterprises with 500-2000 employees.

There are, however, two special co-determination regulations for big businesses. In the large enterprises of mining, iron and steel production, with over 1,000 employees the so-called Iron, Steel and Coal Co-determination Law has been applied since 1951. According to this law, one half of the supervisory board is occupied by representatives of the investors and the other by those of the employees respectively. Both sides must then agree on a further, neutral member. A work director must be a member of the board of directors as a fully-qualified member, who cannot be elected against the voices of the employees representatives in the supervisory board.

For the big businesses of the remaining industries, which have more than 2,000 employees, the general co-determination law of 1976 is valid. In this law, which encompasses around 500 enterprises in all branches of the economy with the exception of the coal, iron and steel industries, and the press, the regulations are more complicated. According to this, there is complete parity per capita between the sides of the shareholders and the employees. But in cases of a tied vote, the voice of the chairman decides, who cannot be elected against the wishes of the investors. Furthermore, at least one representative of the ‘managing employees’, meaning an employee with management functions, must belong to the supervisory board on the side of the workers. The unions would have preferred it, if the co-determination law for the coal, iron and steel industries, which has stood the test of time over three decades, would have been extended to the remaining large factories. But the same have succeeded with legislation, which sees it as a too sweeping limitation of the basic constitutional right to property. The employers’ federations are of the opinion, that in this form the law places too strongly places narrow limits on property rights, and raised a constitutional complaint. The Federal Constitutional Court referred the complaint back and declared that the Co-determination Law is consistent with the Basic Law. The co-determination of workers has proved to be a stabilising element for the economic and social order of Germany. This order depends not least on the readiness of all parties to working together more fairly. The possibility of active co-creation increases the workers’ and employees’ motivation to work and thereby strengthens the efficiency of German industry.

______________________

Composition of the Supervisory Board according to the Factory Constitutional Law

10:4 Investors to workers.

In the coal, iron and steel industry the proportion is 7:7 investors to workers with a neutral member.

According to the Co-determination Law of 1976

Investors to workers – 7:7 + 1 president with a deciding vote and 1 managing employee.

Forms of Co-determination and its Area of Validity

Co-determination after the law of 1976 – 4.5 million employees, large, joint-stock companies.

Coal, Iron and Steel Co-determination law – 0.6 million employees.

3rd Partnerships – 0.6 million, small joint-stock companies.

Interfactory Co-determination (Factory Constitution Law) 9.3 million, the remaining economy.

Interfactory Co-determination (Personal Representation Law) – 3.6 million, the Civil Service.

No co-determination – 3.4 million – small factories with less than 5 employees.

Rights of the Factory Council

Co-operation

Personal planning, dismissals, termination of employment, work arrangements, factory organisation, factory alterations, work protection.

Co-determination

Working time, principles of pay, holidays, social facilities, professional education, factory regulations, recruitment and promotion.

…..

This isn’t workers’ control, but it is a type of industrial democracy, giving the workers a voice in some of the decisions made by management concerning their pay and conditions. I don’t know if this legislation survived the administrations of Franz-Josef Strauss, Helmut Kohl or Gerhard Schroder, Germany’s answer to Tony Blair. Some of the functions of the factory council could be performed through a good trade union, if such things were still permitted in post-Thatcherite Britain. Nevertheless, it seems that German workers, at least the period from 1975 to the book’s publication a decade later, enjoyed a degree of legal protection and a presence in the boardroom that their British counterparts lacked. This is one lesson from our friends on the Continent, which we should learn, no matter what the narrow chauvinists in UKIP may shout to the contrary.