Posts Tagged ‘Henry Neuberger’

Co-Operatives in Pre-Revolutionary Russia and Potential in Modern Britain

March 16, 2014

Co-operative pic

The co-operative movement and store was a major part of working class life during the 19th and much of the 20th century. My parents used to shop at the Co-Op, and receive the books of Green Shield Stamps, a form of the enterprises early profit-sharing. They were also a very strong part of lower-class life in Russia in the years shortly before the 1917 Revolution. The historian J.N. Westwood describes just how popular they were in his book Endurance and Endeavour: Russian History 1812-1886, 3rd Edition, (Oxford: OUP 1987)

In contrast to its attitude towards trade unions, the administration did little to hinder, and even encouraged, the co-operative movement which flourished after 1905. Producers’ co-operatives in the form of artels were already part of Russian tradition; what was new was the sudden popularity of marketing and purchasing co-operatives. There was also a blossoming of the savings bank movement. by 1918 the co-operatives’ membership was equivalent to about one-third of the total population. The biggest co-operative retail store was Moscow’s Kooperatsiya, which had 210,000 members. There was a co-operative wholesale union, (Tsentrosoyuz), and in 1911 a People’s Bank had been founded. The latter, the Moscow Narodny Bank, was 85 per cent owned by the co-operative movement. All this does not mean that Russia in 1914 was well on the road to socialism, but it does suggest that Russians, and especially rural Russians, had not become as individualistic as some commentators assumed. (p. 179).

Westwood also gives this description of the artels, the co-operatives formed by artisan craftsmen.

The elite among them [industrial workers] were the specialists, who often grouped themselves into a co-operative (artel), whose elected leader would seek short-term contracts in such trades as house-painting or stonemasonry.

Artels were also important in industry. They were formed by workers who capitalized themselves by paying an entrance fee. Because the members knew and trusted each other, and cherished the reputation of their group, the artels were noted for their reliability and good workmanship. In a sense the artel member was a privileged member of the proletariat, but he was found only in small-scale enterprises. The bulk of Russia’s industrial workers worked in factories. (p. 177.)

The authors of Socialist Enterprise: Reclaiming the Economy (Nottingham: Spokesman 1986), Diana Gilhespy, Ken Jones, Tony Manwaring, Henry Neuberger, and Adam Sharples also examines and considers the role co-ops played in British industry from the late 1950s to the 1980s. They state:

Workers’ co-ops are often held up as a pure form of industrial democracy. The ideal model of co-ops is one in which working people, given training and the experience of self-management, can extend their control over the work-place to strategic decisions made in the enterprise. They are owned and controlled by worker members on a one-member, one vote-basis, and not by shareholders or the state. Profitability is not the overriding objective because it is enough that the co-operative covers the costs and funds future investment. (p. 50).

They note, however, that co-ops have not always been successful. Many have failed, while others have only survived by cutting workers pay and conditions. They also note the various different forms of co-ops, such as those set up by the Quaker and Christian Socialist, Scott Bader, in 1958, which is really a form of benevolent paternalism, with the actual management structure little different from conventional, capitalist enterprises.

They then consider the problems and positive aspects of many of the small co-operatives set up in the 1970s. They describe them thus:

Many very small companies have been set up as co-ops from scratch. In the 1970s’s many people were attracted to the idea of co-ops, and over 200 sprang up as a result. Many of the people involved were middle-class, well-educated, under 35 and few had children. Typical ventures were left printers, bookshops, wholefoods suppliers, and builders’ collectives. Most are struggling financially, operating in labour-intensive sectors where the profit margin is low. They are heavily dependent on funds from local authorities, ICOF (the Movement’s funding branch) and on members’ own savings. In general, unions have played no part in their establishment and running. They often survive through low pay, unpaid overtime, and poor working conditions often close to sweated labour. An impressive degree of workers’ control is practised – with equal pay, job rotation, and sharing of responsibilities for running the firm. The members often have personal access to professional help and other resources. Their youth and background mean that questions of pay and job security are less important to them. (P. 51).

The also examine the workers’ co-operatives that were founded by employees trying to save their jobs in firms threatened with closure, in particular those at Fakenham, Meriden, Scottish Daily News and Kirkby Manufacturing. The movement here was expanded by the 1974 Labour government under Tony Benn as the Secretary of State for Industry. It was Benn, who financed the Meriden, Scottish Daily News and Kirkby Manufacturing.

These, they acknowledge, were a failure, stating:

In economic terms these co-ops have been failures. Heavily undercapitalised and in a bad market position, they were handicapped from the start. Co-op ownership could not reverse the decline of firms which capitalists had failed to run at a profit. As a result, they were forced to choose between reducing wages and accepting the very redundancies they sought to avert. Meriden only managed to prolong its life because the workforce accepted redundancies and the re-introduction of wage differentials. Such fundamental compromises have reduced workers’ control to little more than a formality.

In no case does the seem to have been any strong initial feelings in favour of the co-operative principle. most of the workers were not asserting their right to self-management. They were willing to negotiate about any proposals to save their jobs. Had it been possible to persuade new capitalists to move in, the worker’s would have agreed. Working people often have neither the confidence, sills nor financial resources to want to take on the risks involved in ownership. Faced with financial pressure, many co-ops have had to turn to middle-class managers to bail them out. (pp. 51-2).

Those founded after the mid-70s, often with the help of Labour local authorities, were much more successful. The authors go on to say

The most impressive phase in the growth of co-ops has been the most recent: there are now thirty times more workers’ co-ops than in the mid 1970s. Co-ops have had a better record of survival than other small businesses, reflecting th4e greater commitment of their members. This growth clearly reflects the increase in unemployment, which has forced many to new ways of working. The most important factor, however, has been the support provided by Labour local authorities. The range of new co-ops is extremely varied: for example, City Limits, London’s successful weekly listings magazine; Pallion Business Services in Sunderland, set up and run by a group of physically handicapped people, provides office and business services; MONS a Sheffield-based engineering co-op, has developed and produced a dehumidifier.

The kind of support Labour councils provide has been sensitive to the particular problems co-ops face. Above all, advice and management help is provide through over 70 local co-operative development agencies, reflecting co-ops’ need for assistance on starting up, product development, marketing, training and legal questions. In addition, investment finance is given through enterprise boards, the development agencies themselves, and new revolving loan funds: £7 million was given in 1985-86 alone. Co-ops are also being helped with premises, planning applications, and in liaising with local trade unions. (p. 52).

They conclude that co-ops cannot be developed from above, particularly in large and medium sized firms, and that shop stewards and employees are faced with a sharp learning curve regarding management. For some this can be too difficult, and the employees will find the experience of attempting to run a co-op dispiriting. However, they note that many co-operatives have weather the recession better than capitalist firms, and that establishing a co-op should be an option open for workers to decide for themselves.

Clearly co-operatives have a strong tradition right across Europe, from Britain to Russia. Although they can have severe problems, nevertheless they can be very successful and provide another way of developing a socialist economy, if only in part.

In Defence of Nationalised Industry

March 12, 2014

National Coal Pic

Since the 1970s, nationalisation has had a bad reputation, caused by the inefficiency, poor performance and appalling quality of some of its products. The classic example of this was British Leyland, hit by a long series of strikes, producing cars of a poorer workmanship and much less attractive than its foreign, increasingly Japanese, rivals. Yet the authors of Socialist Enterprise: Reclaiming the Economy, Diana Gilhespy, Ken Jones, Tony Manwaring, Henry Neuberger and Adam Sharples show that in many cases this images is grossly unfair. They argue

The case for public ownership is as powerful now as it has ever been – just as it has never been more urgent to rethink the priorities for public ownership, the methods of achieving it, the accountability and internal structure of publicly owned companies, and above all, their responsiveness to consumer and community needs. Publicly owned companies should be a model for socialism in practice. Unfortunately, for many people, that is just what they have become: unresponsive, often inefficient and often just as brutal in cutting jobs as private sector companies.

In many ways, this public image is, of course, grossly unfair. Nationalised industries are major investors: over the past ten years they have invested three times as much-for every worker employed – as firms in the private sector; and investment per unit of output has been twice as high. Moreover, companies such as BP, British Aerospace, BL, British Steel and Rolls Royce are among Britain’s top export earners. Nationalised industries have also been highly profitable in recent years. Their productivity record has been impressive, outstripping the private sector. Without public enterprise Britain would have had no domestically owned company in sectors such as motor vehicles, aero engines, shipbuilding, microchips and computers.

The Tory government privatisation programme, on the other hand, means that only the most vulnerable companies starved of investment finance will be left in the public sector. Profits will increasingly reflect the abuse of monopoly powers, rather than the efficiency of the company, and the Government’s obsessive desire to cut public borrowing. These factors are, however, unlikely to win much sympathy for public enterprise. Popular opinion may not favour further privatisation but there is no positive desire for an extension of public ownership. This reflects a deep seated lack of confidence in publicly owned companies which predates the election of the Conservative government in 1979.

All of which is true. This was written in 1986, and after Thatcher privatised the nationalised industries we largely do not have domestic firms producing cars, aero engines and ships. And the sale of some industries to foreign investors was quite deliberate, like the helicopter company Westland and the defence technology company QinetiQ to the Americans. Britain’s economy has suffered, as well as her wider defence infrastructure.

As for public opinion towards nationalised industry, this is not as low as may have been the case when this was written. People emphatically do not want further industries sold off. This is most obvious in the case of the NHS, as two reports by the Conservative party have shown. The I yesterday reported that the people using the East Coast railway line do not want to see it privatised. Mike over at Vox Political has presented the statistics showing that most British people still support the public ownership of the utilities.

There is clearly a large number of people, who support traditional, ‘old’ Labour-style mixed economy. They are, however, ignored by all three of the main parties. Their voice, particularly in defence of the NHS, needs to be heard.

The British Financial Sector’s Role in the Promotion of Foreign Industry

March 3, 2014

Bank pic

In a previous blog post I mentioned the statement by the authors of Socialist Enterprise: Reclaiming the Economy (Nottingham: Spokesman 1986) Diana Gilhespy, Ken Jones, Tony Manwaring, Henry Neuberger and Adam Sharples, that one of the causes for the decline of British manufacturing industry was a lack of investment and the concentration on short term returns by British banks. Later in the book, the authors expand on this statement by showing how the lack of investment in British manufacturing by the British financial sector is actually a legacy from the days of the Empire. According to the book, most British financial institutions, in contrast to their German and Japanese counterparts, were geared to investing in and developing the former British colonies, at the expense of the ‘mother country’. They write

The City’s International Role

The British financial system has failed to meet the needs of domestic industry because historically it has been geared to financing trade, in particular within the British Empire. When capital was raised in London it was more often than not for foreign investment, such as the US railroads. The City is now an international centre for managing foreign currencies – ‘Eurocurrencies’. Banks operating in the UK lend vast amounts of money overseas, many of them foreign banks.

This international role has had far-reaching results. British investors divert more of the national income to overseas investment than any major nation. For example, the two largest insurance companies, the Commercial Union and the Royal, do 70 per cent of their insurance business overseas. Since the removal of exchange controls, 60 per cent of unit trust investment has gone abroad.

In Germany and Japan, by contrast, industrial reorganisation has been closely linked with the provision of long-term finance tailored to the needs of domestic industry. Financial institutions have accepted responsibility for industrial performance, and so developed a detailed understanding of the problems facing industry, both technical and managerial. This tradition of industrial banking laid the basis for special credit institutions. In West Germany, the Kreditanstalt fur Weideraufbau – owned by the federal and regional governments – concentrated on regional policies, with the banks focusing on industrial financing. The Japanese economy is dominated by large holding companies, which include both industrial and financial companies: these have worked closely with MITI, the main government department responsible for industrial policy.

This bears out the Austrian Marxists, Karl Kautsky’s observations about the role of British capitalists in developing and promoting overseas rivals to Britain itself from about the time of the First World War. If these policies have continued – and I really don’t expect they’ve changed much in the nearly thirty years since the book was written – there needs to be a complete revolution in the priorities of the British financial sector. One of the solutions the book proposes is the establishment of a state-owned national investment bank for domestic industry, as recommended by the Labour party and the TUC. I like the idea, but it would face strenuous opposition from the established, vested financial interests, who fear any criticism and encroachment on their domination of the financial sector and British industry.

Third World Thatcherite Britain and the Grab for North Sea Oil

March 1, 2014


Last week both David Cameron and Alex Salmond held separate meetings in Scotland with the petrochemical companies in order to discuss the vital question of the ownership and future of North Sea oil. This is a vital issue. The Scots Nationalists I’ve talked to in the past have all been of the belief that not only should an independent Scotland have a right to the oil reserves off its coast, but that this would support the newly independent nation’s economy. Although this wasn’t mentioned in the news reports, Britain faces the same question. If Britain does not retain revenues from the North Sea if Scotland leaves the UK, then the British economy will plummet. It’s a question of economic survival.

I was taught at school that Britain has a ‘third-world economy’. This meant that Britain was like the various nations of the Developing World in that its economy was heavily based on primary industry. In the Developing World these industries were either mining – the extraction and production of diamonds, for example, or copper in the African Copper Belt, or the various nations around the world specialising in a particular agricultural product – groundnuts, bananas, coffee and so on. In Britain in the primary industry that fundamentally supports the country’s prosperity was North Sea oil.

The authors of the book Socialist Enterprise: Reclaiming the Economy (Nottingham: Spokesman 1986), Diana Gilhespy, Ken Jones, Tony Manwaring, Henry Neuberger and Adam Sharples, make exactly the same point:

Third World Britain

Under the Thatcher experiment, Britain’s underlying economic decline has continued and gathered pace. Only North Sea revenues now disguise its true extent. Without them it would be impossible to sustain the living standards which the working population currently enjoys. Britain’s present levels of employment, industrial activity and public services are all being paid for on borrowed time. (p. 20).

They then survey the way the Thatcher government effectively devastated the UK economy, while Labour unfairly got the blame for economic mismanagement.

It is worth emphasising how disastrous Tory economic policies have been for Britain in purely economic terms. The Tory Party has never succeeded in cultivating an image of compassion or concern for social justice: but at least, so the convention goes, it can be relied on to promote ‘sound’ economic policies and generally do the things that are in the interests of business growth. The Labour Party, by contrast, seems to have a acquired a reputation for economic mismanagement. The really remarkable achievement of the Thatcher Governments has been to find a set of policies which, while designed to make ‘economic efficiency’ the overriding objective in almost every sphere or our lives, has actually had the effect of making our economy less efficient – as well as having all the more predictable results such as a huge increase in social deprivation, inequality, injustice and division. As a result we are now in a situation where socialist economic and industrial policies offer the only serious hope not only of healing deep social divisions but also of reconstructing a viable and efficient economy.

Employment levels in manufacturing, construction and the public services plummeted after 1979. The international climate worsened, it is true, following the oil price rises of that year. All the major Western countries have faced increased unemployment during this period. But in Britain’s case, government policies have played an almost uniquely important part in creating a fall in national output and an increase in unemployment. By pursuing exceptionally high interest rates as part of the attempt to reduce money supply growth and inflation, and then letting the market determine the level of the exchange rate, the Tory Government precipitated a massive crisis in the manufacturing sector in the period 1979-81 – especially among companies which were relatively dependent on export markets or which had recently expanded investment or stocks in anticipation of sales growth. Meanwhile attempts to reduce public spending and borrowing resulted in a further deflationary effect: there was a particularly severe impact on employment as capital projects and welfare services were sacrificed to pay for the escalating costs of increasing unemployment – not merely a vicious circle but an insane one.

If we look at another traditional measure of economic success or failure, the balance of payments, we see a similar story. Since 1982, a surplus on manufactured goods has been replaced by large annual deficits – the first such deficits since the Industrial Revolution. Imports and import penetration have risen sharply in virtually every sector of manufacturing. These imports have, of course, been paid for out of oil revenues. But declining oil revenues will no longer be able to offset the growing manufacturing trade deficit in the late 1980s and 1990s.

They then go on to consider some of the contributing causes to British industrial decline, such as the price of British goods, lack of investment in research and development, and the lack of an education workforce, some of which is now extremely dated.

Nevertheless, I think the main point is still valid. Thatcher destroyed the British industrial base, and it is still only North Sea oil revenues, which is propping the economy up, despite the Tory and New Labour attempt to promote the financial sector. If Britain loses these revenues, then the British economy will collapse. My guess is that we would still be in the Developed World, but go from one of the most prosperous to one of the least.

The result of this would a further massive collapse in living standards, accompanied by bitter discontent. In the Developing World, mass poverty traditionally gave rise to extremist political movements – Marxist revolutionary groups, and the various Fascist dictatorships like those of General Pinochet, Manuel Noriega et cetera ad nauseam used to contain and suppress them. The same is likely to arise in Britain. This would effectively discredit all of the main political parties, as all of them have been influenced to a greater or lesser extent by Thatcher’s legacy. But those most effected would be the Tories as Thatcher’s party.

No wonder Cameron was up in Scotland last week trying to keep hold of North Sea oil. If that goes, then so does a large part of British prosperity and the Conservatives/ Thatcher’s image as the party of British prosperity.