Mutualism represents perhaps the most flexible and beneficial way of transforming our public services. Happily, the government is committed to this model: Francis Maude, Minister for the Cabinet Office, has stated that he would like to see a million public sector workers employed in mutuals by 2015. In simple terms, mutualism is based on principles of reciprocity, equity and fairness. It is a system that allows for equity (what you put in and therefore can take out), be that in terms of finance or services, to be realised in any number of ways.
To achieve the positive transformation of our public services, we need to find new models of mutualism fit for the 21st century. This means creating innovative ways of bringing together public and private capital, enabling private companies to make a fair return from their capital investments, while at the same time giving all those involved a stake or return of some sort.
An example of how this can work comes from the energy sector. In Denmark, a community will often allow an incinerator to be built in their neighbourhood (in Britain the very idea would provoke mass protest) but they get cheaper electricity in return, often around 30%. The incinerators, designed by the very best architects, cut down radically on waste disposal and landfill. In addition, house price values increase for those on the local energy network because bills are cheaper, and the strategy is seen as ethical. To me, this type of reciprocal economy is a form of mutualism.
Mutualism is and should be a broad church – whether based on joint ventures, cooperatives or social enterprise – because what matters is not the form but the relational and reciprocal structure. If equity rather than equality is the aim for modern mutuals then one can construct any number of hybrid vehicles to deliver mutual outcomes. The aim is to create more through people working together than is possible when people operate separately.
What we need to do is include more people in markets and, crucially, include more of them as owners. You can’t have popular capitalism if the poor don’t have capital. The structure of economics we’ve followed for the last 40 years has stripped capital from people. If you chart the availability of liquid capital (cash shares and so on) that those at the bottom of society have, they have effectively been ‘decapitalised’. In 1976, they had 12% of the available liquid wealth; in 2003, that was down to 1%. If we don’t create mass ownership of capital, it means that one part of the population is in permanent serfdom to the other. What we have to do is ‘recapitalise’ people by giving them each a new stake or share. For public services, this means creating shared capital and equity through some sort of mutual model, which offers a sense of ownership. This ownership doesn’t have to be financial, although in most cases I think it should be, and will give workers an increased sense of control over their lives.
This creates genuine win-win situations. There are reasons why employee-owned companies like John Lewis have a return that is 10% higher than the average FTSE 100 company in terms of profitability. Or take the Sandwell Community Caring Trust, a charity created in 1997 from a local authority care home. According to the Social Enterprise Coalition, admin costs have fallen from 22% of turnover in 1997 to less than 6% today. Staff sickness has gone down from an average of 22 days a year in 1997 to 0.3 days in 2007, while turnover spent directly on frontline care has risen from 62% in 1997 to over 82% in 2006.
Staff have retained existing pay and other conditions but improved performance now also means being eligible for an equal bonus. In 2006, residential care for the elderly cost the local authority £657 per person per week, whereas the Trust has reduced this to £328 per person per week. The new model means a high degree of work satisfaction at a greatly reduced cost.
The question remains as to whether the government’s goal of seeing a million public sector workers in mutuals by 2015 is achievable. It is possible but the challenges are considerable. Many public sector workers are driven by vocation, and if they see that they can provide a better service within a mutual framework, then mutualism in the public sector can succeed. But employees can’t be offered risk for no return; you have to offer certain guarantees if you want them to move to a new platform. The offer to public sector workers has to be geniune. It has to be based on an equity stake, on the security of a viable business model (which means good contracts for the initial spin out companies) and on the genuine option of learning new skills, while also letting people share in the efficiencies that result.
It will be hard for a public sector used to permanent job security to make such a radical change, but it will ultimately give workers far more control over their working conditions and futures. Outside the public sector, we need to develop a way for our citizens to organise into groups, which enable all members of society to create new possibilities for themselves, which are simply not achievable for them as individuals.
The next great wave of western advance and productivity will, I suspect, be based on a 21st century variant of mutualism. No other form of management innovation can deliver the step change so badly needed. It will be difficult but the outcome could be something significantly more efficient, radical and transformative than any other option can realistically offer.
This article originally appeared in the October 2011 publication of Ethos. See here