RE: EOpriv: Building employee interest

[jdoggett <jdoggett@kent.edu>]

Dan,

In reading this posting, I think that what becomes apparent is that there is a 
paradox in the logic of privatization.  (Although not stated, I assume a 
context of Central and Eastern Europe and Russia and the former Soviet 
states.)  The paradox is this: there is the state and there is the private 
economy.  These are separate spheres.  However, there is an unstated reality 
to privatization.  The two can intermesh again.

When privatizing, the goal seems to be to get the state out of the market.  
Defining the public sector and private sector might be a good idea.  Weintraub 
provides a good definition.  He states, for our purposes here, that the public 
sector is the administrative state, and the private sector is the market 
economy.  These spheres seem to be separate.  Clearly the assumed goal of 
privatization is to have the public sector, the administrate state, maintain 
the affairs of an orderly state--laws, governance, judicial system, etc--and 
to have the state separate from the private sector.  The private sector should 
be firms operating within a market.  These firms should compete against one 
another.  Profits should be the motivating factor.  Firms that fail to make 
profits, or are inefficient, should be driven from the market.

However, the public sector and the private sector rarely, IF EVER, are 
separate.  A reality in the United States, for example, is that interest 
groups, or similar groups, can utilize their influence within the public 
sector to receive benefits.  These benefits can take the form of having a 
government contract be given to the "lobbying group".  There can be tax 
advantages given to a certain sector, group, or industry.  Or, the government 
can fund, another word that one can use is subsidize, a certain firm, sector, 
or group.

Now, the point is that the goal, or assumed goal, of privatization is the 
divesture of producing units from the public sector to the private sector.  
However, this type of separation rarely, if ever, occurs in totality.  As Dan 
stated, employees, via the union, can turn their size into a prowess that 
confronts the state so as to achieve certain benefits.  I think that Dan hit 
upon the logic that confounds people within firms who are undergoing 
privatization in Eastern countries: Privatization and separation from the 
state, but the union should demand to be heard from the state and receive 
certain benefits.

I do not know where to proceed from here.  I could become a smart ellic and 
parody the logic of privatization.  However, this would be to no avail.  A 
productive discourse on the topic should aid in discovering how to address the 
paradox, and how to aid workers who exist within the paradox.

Sincerely,
Joseph Doggett


At 02:34 PM 9/14/00 -0400, you wrote:
Again, I look forward to feedback, comments, suggestions.


5.2     Building employee interest

        It is not surprising that many workers are resistant to the idea of 
seeing
their company move from state ownership to employee ownership. Part of this
resistance can be attributed to objections they may have about private
ownership in general, but some may also be simple disbelief. To build
employee interest, one must overcome both ideological objections and
personal fears. In turn, to overcome personal fears, tools and resources
must be available to make a successful outcome realistic.

        One ideological objection to privatization is the belief that the 
nation's
patrimonial assets are being taken away from the community. Workers who are
comfortable with a socialist way of thinking may feel strongly that the
means of production should be controlled by the community, not distant
investors. Employee ownership, to the contrary, anchors the national
industrial jewels in local communities. While outside buyers may plan to
move the economic activity away, employee owners are part of the local
community.

        Organized labor may object to privatization because it is often done in 
a
way that weakens their ability to protect the rights of their membership.
Laws that govern labor relations in state enterprises may not apply to
private companies and past promises of job security and benefits may not be
honored by the ownership successors. Showing union leaders models of
employee owned enterprises where labor leaders continue to play an
important role can help deal with the question: how do we bargain with
ourselves? Labor leaders can benefit from understanding the advantages and
disadvantages of a broader set of scenarios than simple status quo or sale
to an outsider. Building a contingency plan around an employee bid can help
them prevent a worse outcome if the fight to stop the privatization fails.
Unions need to figure out ways to simultaneously prepare for an employee
purchase at the same time that they are campaigning to stop any sale.

        In addition to the discussions about whether privatization is good or 
bad,
individual workers have fears about what will happen to them personally.
Proponents of employee ownership in privatization need to listen to workers
express these fears early on before pushing the privatization process
forward. Upon identifying these fears, strategies for deal with them need
to be included in the plan. Educating employees about where employee
ownership has worked in privatization can go a long way. Also making them
aware of the assistance and structures available to help them succeed will
reduce some concerns.

        Technical assistance programs designed to educate employees and organize
them as proactive agents in the buyout process are important. Funding must
be made available for prefeasibility studies which explore legitimate
concerns and explain how their firm will succeed as a private
employee-owned enterprise.

        Employee fears of failure without the deep pockets of the state can be
softened if they know there is a fund set up to guarantee no first year
layoffs. Procurement contracts from the state to guarantee a minimal level
of production can help. And the establishment of a national credit agency
specifically for enterprises which were previously on the state budget can
ease concerns about not having a deep pocket.

        Finally, helping employees build connections to the political powers
responsible for their future can open up lines of communication and build
trust. Employees must sense that the government is sincere in its
willingness to accept the long term challenge of seeing that they have
income security.

--
Dan Bell
International Program Coordinator
Ohio Employee Ownership Center
Kent State University
Kent, OH 44242
(330) 672-0333 << New direct number!
(330) 672-4063 fax
dbell@kent.edu
http://www.kent.edu/oeoc/
http://cog.kent.edu