Great news regarding Item Number 2, as Vince Cable has just pledged to mutualise "at least 10%" of the Royal Mail: http://www.guardian.co.uk/politics/2010/sep/22/vince-cable-criticism-attacks-capitalism

Chris. I see very great merit and utility in your pioneering of LLP partnering frameworks which expand individuals and groups ability to better co-author their lives. In at least two areas outside of the pared down government functions of law and order and defence I do, however, see a continuing role for representative government. Firstly, if it is accepted that in an age of globalisation our societies are now dominated by mercantilism in which capital is engaged in carpet-bagging then we depend upon our governments to ideally adopt a balanced trade policy either as an individual country or through union with other countries such as the European Union. Certainly we would expect the individual country or trading bloc to take action against countries that cheat through currency pegging tricks or unfair subsidies or breach of international patent and copyright law. Secondly, I don't think we are able to stop over-production of certain goods in a free market which inevitability can produce problems of difficult adjustment where capital and labour have to switch to other areas of activity. At such times a government role not least in covering gaps in welfare provision as a sort of mutual insurance policy seems worth keeping in place.

Thanks for your thoughtful responses.

The basis of the work I have been doing is the need for a legal and financial framework which addresses a world of direct instantaneous connections.

In the rapidly emerging 'peer to peer' society intermediaries are becoming obsolete and must transition to service provision or disappear. I refer to this process as 'Napsterisation' after the transformational music file-sharing site.

The 'tax and spend' State and its representative democracy are just as unnecessary as intermediaries as are the shareholders in 'for profit' companies and credit intermediary banks.

A final thought. If the British and American disease is that capitalism is now effectively mercantilist, carpet-bagging, maverick and substantially in the hands of a few short-termist managers of large corporations then it is effectively in opposition to the whole notion of democracy which is for the citizens of a country to be able to associate effectively to co-author a common good. ( I use the word co-author rather than co-partner, or co-own, to convey a more active usage.) Apologists for mercantilism will argue that it’s the competitive pressures of capitalism that determine that developed country’s economies should have demand undermined by outsourcing their jobs to other low wage, currency and subsidy manipulating countries. This amounts to admitting that mercantilism is in its fundamental nature in complete opposition to the co-authoring function of democracy. The Big Society idea, however, is at base about the British people co-authoring their future together. It is about them having tribal loyalty to each other. This is the root emotion at the heart of Conservatism not the Thatcherite or Blairist promotion of mercantilism. The sincerity of David Cameron’s commitment to the Big Society idea, therefore, lies in the effort he makes to implement co-authoring of Britain’s economy on a massive scale and that will take money. This has implications. There would appear to be two courses of action. Firstly, there could be the establishment of a national Guarantee Society to encourage loans to flow from private sector sources to achieve the co-authoring power in corporations and businesses through capital acquisition. Public money providing the sole loan guarantee would be possible but a more palatable option would be to encourage private sector money into the Guarantee Society. The second option is more radical and involves removing the credit creating function from banks entirely and placing it into the hands of the Bank of England revamped as a more broadly representative quasi-independent body. The creation of credit should be a co-authoring power of the people and not a privately controlled function prone to misuse as the history of inflation and repeated financial crisis events shows us. With such a transfer of credit creating power it becomes feasible for the Bank of England to provide the credit to purchase the co-authoring power in businesses. It might wisely consider doing so in the form of investment bonds that can only be reinvested in British businesses thereby helping to avoid capital leakage and creating massive economic stimulus.

Chris. One argument I did forget to make that supports Margaret Thatcher’s action against the local state unilaterally agreeing loan guarantees is the central state’s overall responsibility for controlling inflation and taxation. This is certainly not followed consistently when, for example, you allow a Federal Reserve Bank to be controlled predominantly by the banking industry along with the ability to generate credit at will which can be inflationary not to mention a cause of the financial crash being the irresponsibility of the banking system in creating loans for financial speculation where a bet on a debt was regarded as an asset in the case of the now notorious mortgage bonds. Clearly the argument for taking credit manufacture away from the banks and placing it in the hands of a quasi-independent body with across the board representation from the manufacturing and service industries is a good one especially when the possibility exists of substantially reducing interest rates and in consequence the rate of inflation. Nevertheless I think arguing that the central state does play a key role in regulating public expenditure reinforces the argument that any loan guarantee scheme that involves any element of tax payer money to promote co-ownership has to be a central state championed initiative.

Chris. Thanks for your comments. We seem to be in broad agreement. I would argue that in the UK the central state maintains a high level of control over the activities of the local state as witnessed by the article link I supplied earlier in which Margaret Thatcher shut down the ability of local government to enter into partnership projects like the UKHT/Sheffield City Council innovation which involve revenue or loan repayment guarantees. In consequence for me the logic is that the central state must be willing to promote programmes of co-ownership of new and existing businesses involving loan guarantees albeit that the implementation might involve the local state as well as the central state. Clearly the local and central state rarely have the expertise to assess business viability for such guarantees so expertise in this field also needs to be brought in.

I do think a co-ownership programme has to be the main priority for countries like Britain and the United States simply because of the need to tackle the weakness in demand problem. I tend now to see these countries as being like Carpet-Bagger Republics where capital is allowed to flow to low-wage currency and subsidy manipulating countries such as China for manufacturing investment creating downward pressure on wages in Britain and the States and consequent decline in demand. Carpet-Bagging movement of capital can be understood as businesses responding to the need to remain globally competitive in export markets but since they’ve also been making very good profits and have great political clout the other route of seeking balanced trade and trading restrictions on countries that trade unfairly has not been sought.

The ability to carpet-bag capital can be seen as a consequence of Liberalism. This is Phillip Blond’s argument where the over-emphasis on individual rights protected by ruling class captured government mitigates against the common good. I tend not to fully agree with Phillip because history shows that asserting individual rights is often needed when the common good pursued is not so good. In other words I see it as a matter of seeking balance between the individual and the communal but I do think we naturally and usually seek to attain achieving our individual needs through pursuing the common good. I’m inclined, therefore, to think that Phillip’s attack on Liberalism is really code for the absence of tribal loyalty within nations with carpet-bagging capital being the manifest symbol of it and in this I’m fully in line with him. If tribal loyalty is an important part of keeping a nation’s economy healthy then finding the means to express that loyalty is critically important. This brings us back to implementing a co-ownership programme and the key necessity of getting a government on board to set up a loan guarantee scheme. Of all the things that ResPublica is trying to do I would argue a loan guarantee scheme should be its most important objective since from this so many other things flow obviously not least the restoration of demand within an economy. Britain, if not the United States, now knows that in the wake of the financial crash it can no longer dare to rely on its financial services sector as a primary engine of growth it must copy Germany with its co-determination philosophy and return to excellence in manufactured products using its influence in the European Union to block imports from countries engaging in unfair trading practices and argue as part of this for the wisdom in being allowed to practice balanced trade.

I think that participation by local municipalities could be very useful in respect of guaranteeing credit advanced by suppliers to start up and youth enterprises (who have no track record). They could also themselves extend credit in respect of local taxes and even rentals of municipal properties.

As for Labour working with, rather than for, Capital, I believe that 'co-ownership' through a revenue or production sharing 'capital partnership' may in fact be an optimal enterprise model.

This 'co-operative of co-operatives' has what the co-operative movement calls the 'co-operative advantage' ie the freedom from paying returns to unproductive rentier shareholders.

Note here that I believe that such partnership-based enterprises can and should take on many of the utility functions currently carried out by the State.

That is why I believe that Phillip's 'Big Society' is in fact the greatest opportunity Labour and the Unions have had for 100 years, if their membership only realised the empowering possibilities of new structures.

Thank you Chris. I guess the obvious question that I should have asked you is whether you would actually see any benefit in government helping out private guarantee societies by assisting in the guarantee process? I confess that my interest lies in society finding the financing for creating joint capital/labour ownership of existing companies to help stabilize demand which I believe is the true underlying cause (labour treated as an externality) of the Wall Street financial crash and the number one issue to be addressed. I should add that I regard capital as "stored labour" whose possession is useful to us all for investment purposes such as pensions to spread risk and the ensuing economic rent dealt with through democratically determined taxation policy.

Guarantee Societies exist in 18 European countries where they involve the guarantee of loans by banks to their members.

Our Guarantee Society concept was originally developed in relation to the mutual guarantee of consortia of local businesses so that they could engage with local councils etc. This would solve a major (and increasingly difficult) issue in relation to procurement of services where councils will only engage with big firms, who then sub-contract to local suppliers, typically on unequal terms. Our concept was adopted as policy by the Scottish Lib Dems for a couple of years.

In the last couple of years we have extended the GS concept to the mutual guarantee of bilateral 'trade' credit, with the outcome of interest-free, but not cost-free mutual credit provision, where banks act as service providers rather than credit intermediaries.

We are hoping to implement a prototype in Scotland, but the 'Capital Partnership' concept takes precedence, since we have (very) limited resources.

Chris. Thank you very much for the links. I'm curious to know if the UK has any guarantee societies?

In fact, the revenue/production sharing 'capital partnership' is one of two partnership-based microfinance (although if you link lots of 'micro' from the ground up, you get 'macro') tools we developed with a little seed funding from Innovation Norway.

The other - the 'guarantee society' - is a framework for the mutual guarantee of bilateral peer to peer 'trade' credit.

See

http://www.policyinnovations.org/ideas/innovations/data/000085

and

http://www.slideshare.net/ChrisJCook/link-alt-finance-19-11-09

I think these ideas are as yet maybe a little too untested and/or radical for Res Publica, although Phillip has been genuinely interested and Asheem has been kind enough to publish a couple of posts.

Chris. It's interesting that you make the remark about getting more traction North of the border. I don't have a clue why that should be but I do tend to think that the role of guarantees is important to oil the wheels when asking individuals to share in risk. The UKHT-Sheffield City Council Housing Partnership, for example, only happened because of the council's risk guarantee. The selling of toxic mortgage bonds as reasonably safe investments was also smoothed by the rating agencies phoney Triple A ratings which acted as a sort of quasi-guarantee. Pension funds obviously have to be cautious but many did get taken for enormous sums by this toxic mortgage bond scam and they are now suing the banks who sold them.

I think conservative investing for some of the partners in a proposed LLP is just an issue that has to be addressed in using partnering frameworks. What intrigues me, however, is whether its possible for society to do this by linking up government guarantees with market derived guarantees that mutually support each other to promote much greater use of LLP's. A sort of piggy-backing arrangement if you like. If a very little oil can be used as a catalyst by the state this helps to deter the attacks by the market fundamentalists on the state taking too much risk with tax payer's money whilst also providing leverage by the state on the market to act more responsibly in safe-guarding default. Such mutualised state/market guarantee schemes would go a long way to making the Big Society take off in a big way. Perhaps this is an idea you and Phillip Blond would find common cause in promoting.

Thanks for that thoughtful comment and links.

In fact I am getting much more traction with these concepts North of the border in Scotland than I am in England.

There seems to be an aversion in England (and in the US it's far worse) to anything other than the conventional absolute forms of property rights.

So current attempts to implement the 'Big Society' appear to be relying upon genetically modified forms of obsolescent legal forms, which is a pity, because it is not possible to change a system from within.

Cheers, Schofield.

Asheem has kindly run a couple of guest posts of mine here.

For those interested, pages 8 and 9 here

http://www.scotregen.co.uk/pdf.pl?file=surf/news/Scotregen_46_web.pdf

and

http://www.slideshare.net/ChrisJCook/community-land-partnership-june-2010

cover land/housing, while this presentation set out a new 'unitisation' approach to energy funding

http://www.slideshare.net/ChrisJCook/energy-pools-scottish-energy-institute-11-11-2009

There's much more elsewhere, including a new approach to infrastructure funding and mutual credit.

Chris Cook. I think you are absolutely spot on with your promotion of US LLC's and UK LLP's as a route to providing partnering frameworks and helping overcome the Principal/Agent problem. I think it would be an extremely useful contribution if you could further elaborate or flesh out your funding ideas for community interest companies for the ResPublica audience.

While community interest companies are useful vehicles for acting as custodians of assets, due to the statutory asset lock, they are otherwise just genetically modified companies, as are the (recently re-named) Industrial and Provident Societies used by Co-operatives.

The company legal form, with its inbuilt 'principal/agency' conflict between owners and managers, is long past its sell-by date. As the Economist pointed out the other day, the future lies elsewhere, particularly through the emerging use of partnership vehicles such as the US LLC and UK LLP as frameworks for investment, rather than as organisations.

The key advantage of partnership vehicles for 'co-ownership' is that the medium and long term funding of productive public assets - held in the common ownership of a custodian - does not require either repayment of debt, or compound interest.

Such 'public equity' enables a transition from our existing burden of unsustainable debt.

The simple fact is that the public sector does NOT need to borrow to invest long term.

Other than British Waterways and those mentioned above, my three candidates would be:

Network Rail,
the Port of Dover,
and London Underground.