Don Flynn – Momentum Greenwich

This is the second in a series of papers by members of Greenwich & Woolwich Momentum as a contribution to the debate among socialists and activists in the Labour movement about a socialist response to the unprecedented health, social and economic crisis unleashed by the Corona Virus.

The Covid-19 health emergency is bringing one of the deepest economic recessions ever seen in its wake. At this still early stage of an unfolding crisis it is important to say that all predictions are guestimates about the course that history will take. Nevertheless, here are the main reasons why we should be very worried.

Overall, the economy is set shrink by 14% in 2020 and the growth in unemployment, already up by 2 million since mid-March, will continue throughout the rest of the year. The jobs of 7.5 million people have been covered by the Treasury’s job retention scheme. This will be phased out in the coming weeks exposing more people to the loss of their jobs as employers decide that business activity is so slow it cannot maintain their pre-coronavirus workforces.

Job loss will be just one part of the hardship that will hit households in the next period. The Resolution Foundation has calculated that the hit to the UK economy is the equivalent of £9,000 per household. Families outside the wealthiest groups went into the health emergency with already high levels of debt, estimated to be in excess of £1.28 trillion. With households in the lowest income brackets having little or no savings to help them through tough times a prolonged period without work will drive many from already high levels of hardship into outright destitution.

No Easy Way Back to Normal

The government is praying for a rapid economic recovery as soon as lockdowns and social distancing are finally phased out, but this seems unlikely. Much of the structure of employment in the UK depends on the small and medium-size enterprises – 60% of all employed people – which are being hit hardest by the closure of the markets they serve. Family firms often run on a hand-to-mouth basis at the best of times and are dependent on bank loans to shore up their monthly cash flow. According to the British Chambers of Commerce 6 in every ten firms have less than three months’ worth of cash at their disposal. Their chances of surviving this crisis with massive help from government are bleak.

The coming crisis will be so deep it will place the future of the Labour Party on the line if it is not able to come up with measures that protect people dependent on earning a wage from the worst of what is expected to happen. The Party’s relationship with working class communities in many parts of the country, already under strain, will be further tested if it fails to point the way out of the developing recession.

Fortunately, some the ideas about what a socialist Labour government might do to move beyond capitalist crisis have been worked on during the extraordinary period when the Party was led from the left between 2015-20. Many of these are crucially relevant to the situation we are in today and it is vital that the new leadership comes up with a plan to carry them forward, from opposition to the Johnson government, and into power itself at the first opportunity.

Three Areas Demand Action

Progress in this direction will hang around strong advocacy for policy and action in three areas. The first of these concerns the conditions that need to be imposed on the companies that are already coming to government asking for bailouts to keep them trading.

The Tories will follow the standard pattern of conceding the demands from the biggest companies in the hope that the mega sums they ask for will limit the cuts to their payrolls. In return for vague promises in this direction they will be ready to give large sums of money to corporations which intend to channel the bulk of any windfall to their shareholders in the form of enhanced dividends.

Labour will need to fight this tooth and nail. It should make it clear that any bailout will be conditional on scrapping the shareholder value model of British companies, which in recent years as seen the largest firms paying out over £100 billion each year in dividends. The bigger the dividend the higher the price of shares in the company; and with the bonuses of many CEOs being linked to share prices the whole system has become a corrupt cash grab which has worked against the interests of working people.

Open the Books!

Can corporations be repurposed to work for the good of ordinary people rather than a tiny minority of wealthy shareholders? That is a question CEOs and their boards of directors will have to answer. If they plead some special case which prevents their business from changing the way it works then they should be required to open their books to public inspection to determine whether or not they are attempting to obfuscate their true position.

There is a bottom line here, and Labour should not be afraid to spell it out. If the firm cannot meet the requirement of saving jobs and ensuring the business operates in a socially responsible way, then Labour should let it be known that it will move to take companies into public ownership.

What is the standard for public good that Labour should insist on? The answer is that it will operate within the framework of the Green New Deal. Whether in the private or public sectors a Labour government will need to make it absolutely clear that backing will only go to the production of goods or services that work to end the use of carbon fuels by the deadline of 2030.

The second plank in Labour’s plan for change will be its extension of democracy into the control and management of enterprises. The old model of nationalism hobbled itself by leaving in charge the management structure bequeathed by the previous private owners. This will not meet legitimate expectations on the part or ordinary people for innovation and a transformation in the way the economy is run. At a minimum workers need to be brought onto the boards of companies, not just to rubber stamp decisions made by traditional executives, but to shape the fundamental structure of the businesses and the quality and usefulness of the goods or services it produces.

Co-operative Model and Workers’ Control

The Cooperative Party’s call for employee ownership of business needs to be brought in from the margins of policy discussion and made the centrepiece of Labour’s call for change. The short-termism of corporate strategy – inflate share value and let CEOs and their friends walk away with the profits – is crippling British industry and is responsible for opening up a 20% productivity gap with other European countries. In its report, Owning the Future: The Co-operative Plan for Recovery, the Cooperative Party has pointed to the evidence set out in the new Economic Democracy Index, which shows that by measuring economies by the extent of workplace rights and collective ownership in the form of co-operatives and credit unions, there is a clear correlation between productivity and workers having a greater say and stake in their workplace.

The third aspect of Labour’s demand for change drills right down to the level of cities, towns and local communities. As an economy and a democracy Britain has been crippled by its excessive centralisation around the Westminster hub. The devolution of some powers to the Parliaments and Assembles in Scotland, Wales and Northern Ireland has only slightly diminished a centralised power structure which bases its authority on the 85% of the population who live in England. Within this system regional and local government operates within a narrow space controlled by the Westminster government.

Control over local authorities is determined by Treasury dictated restraints which for the last ten years have demand austerity from its underlings. Assets owned by local councils can be commanded to be disposed of by central government departments, as what has happened most notoriously by the so-called ‘right to buy’ instruction to sell off council housing and reduce public involvement in the supply of affordable homes. Planning decisions around the use of local assets are ultimately subject to the whim of central government secretaries of state. They oversee the direction of change in local communities, altering not just physical space by permitting the tower blocks that overshadow much of our urban landscapess, but also the nature of local communities themselves through the marginalisation of less wealthy households and changing the nature of economies.

The Preston Model of Community Wealth Building

Despite the unequal balance of forces between central and local government, it is still possible for Labour-led councils to lead the pushback against Westminster governments which listen more to big business than they do to ordinary people. The pioneering work here has been done by Preston City Council which has developed the strategy of ‘community wealth building’. This committed the Council to pursuing a more diverse blend of business ownership models which have worked to return economic power to local people and institutions.

The City Council was able to increase flows of investment within the local economy by harnessing the wealth that exists locally. It aimed for less dependency on flows of corporate capital by making use of, among other things, local authority pension funds and mutually owned banks. These are encouraged to grow and work with regional banks to enable local economic development.

Mutual wealth building aims to change the way local labour markets work. The Council itself, one of the largest employers in the area, set the standards by concentrating staff recruitment on people from lower incomes areas and paying the living wage. Progression routes for workers are aimed to raise skill levels and increase the use that the local knowledge of employees to facilitate change. Procurement policy worked to increase of local supply chains by making use of local SMEs, employee owned businesses, social enterprises and cooperatives and other forms of community business. This produced a local environment where businesses of all types were more likely to support local employment and have a greater propensity to retain wealth and surplus.

Adapting the Template

In this work Preston City Council has produced a template which is there to be used and adapted by other local authorities. It requires real insight to the social and economic conditions that apply in different local communities to create an approach that it fits each set of circumstances. Some of the information needed to do this is already held by councils, but more exists in the knowledge possessed by local people and institutions. This means reaching out at every stage of the wealth building project to bring in the resources which are there in the community.

All of the three strands of work set out here are part of a single project which needs to be placed at the heart of Labour’s appeal as it campaigns to get the power it needs to bring about change.

All three elements are essentially about democracy. The first, by aiming to increase public influence and control over the operations of corporations, including taking them into full public ownership.

The second by changing the structure of all enterprises and services, whether in the private or public sectors, by building co-operative business models, worker representation and control into their structure.

The third, by strengthening the capacity of local government to influence and direct the way in which communities and the economies that sustain them develop and move into the future.

Together they make up the hope that the fight against unemployment and all the problems that it brings, will be addressed and overcome. To take these ideas further we will all need to work with trade unions, co-operative associations, Labour parties, and local community groups to forge the alliances that will be needed. We should begin by taking on the task of mapping the social and economic structure of our local communities, anticipating the places and the people that will be hardest hit by the anticipated recession, and working to put in place the structures that will provide support, solidarity and build resilience. If we do this right the possibility of achieving radical change will be in out grasp, but only if we begin, now, to work for it!

Author: Don Flynn

The Battles Ahead: A Three-prong Plan to Build Democracy and Fight Unemployment!