Re: OWNERSHIP: No 3rd Way?

[Dellerman@worldbank.org]

Many thanks for the piece on Giddens' views, which as you note are rather
ill-informed but worthy of comment.

1. The Meidner Plan was about shares in regional holding companies
controlled by labor unions and there was little or no connection to direct
rights in one's own company.  The discussion about worker coops may have
been in that debate but was not in the Meidner Plan itself.

2. "If market pricing is necessary for efficiency in respect of other
assets, including labor power, capital cannot be made exempt; the
difficulties created in centrally planned economies would simply reappear.
For no market criteria or discipline would be available to mobilize the
effective use of accumulated investment capital."

Is Giddens arguing that since slave markets are abolished, that we don't
know how to efficiently allocate people?  Please, Tony, get a grip on your
arguments.

Secondly, TG seems to have all sorts of misunderstandings about capital
markets.  The capital markets relevant to market pricing of loanable funds
or physical capital are still there in an economy of labor-managed firms.

The membership rights in such firms, like the citizenship rights in a
political democracy, would not be marketable commodities.  Does TG think
that these and other human rights are "inefficiently allocated" because
they are not marketable commodities?  Actually they are assigned in quite a
different way, but not one paid attention to in economics texts.  Since
there are willing buyers and sellers for political votes, it would be a
pareto-improvement if we allowed people to sell their votes.  Does TG think
we should sell them?  Economists are embarassed by the question because
they don't have an answer so they just duck it.  TG would I imagine be
against selling such rights, so the question is why does he think that the
citizenship rights or voting rights in economically-democratic communities
(LMFs) are different?

3. "There would be little motivation to take on new workers in existing
collectives because each person's shareholding would be reduced; there
would be little mobility out of the cooperatives because the individuals
concerned would not be able to take their shares with them."

TG is using a primative "shareholding" model of a democratic firm.  We have
learned from Mondragon as well as from ordinary law firms that the
membership rights (partnership rights) are quite separable from the amount
of capital in the firm that is individuated to the member (partner) which
is kept track of in the member's (partner's) capital account.  Shares
unnecessarily bundle together those two very different types of rights,
which we and law firms have learned to unbundle.

A new partner in a law firm does not automatically get a capital account as
accumulated by a senior partner; otherwise there would indeed be a rather
strong bias against new partners.  It's the same in the Mondragon-style
co-ops.  TG is thinking of shares that bundle together membership rights
and capital rights, and thus he assumes falsely that admitting a new member
is automatically diluting one's capital rights as expressed in one capital
account.  Again, it is good to learn which problems have been solved and
are evident in practice in the law firms of the City of London and the
worker co-ops of Mondragon before repeating these tired old arguments
against obsolete cooperative structures.

The last argument that there would be little mobility out of the co-op
because the individuals couldn't "take their shares" is also not well
informed.  In a law firm, it is not always possible to pay out a partner's
capital account upon demand.  Smaller labor-managed firms would have the
usual liquidity problems of other small firms where owners cannot easily
cash out their money.  In firms large enough so that they might have
actively traded shares in the capitalist case might well have actively
traded income bonds or debentures in the LMF case.  When a worker
terminates membership and their internal capital account is closed to
future profit shares (positive or negative), then it could be externalized
immediately as a new income bond issue which the individual could sell
immediately.

There are also procedures to prevent capital account balances from building
up so that not so much risk is borne by the older members.  This is called
"rolling over" the capital accounts and the idea is that additions to the
account are dated.  Charges to the accounts (negative profits shares) are
subtracted from the oldest entries (FIFO system) and then any positive
entry that survives a certain number of years (say 8 years) is paid out.
This system also has the feature that when a member leaves then with no new
debits, the account would be paid in the normal course of things after 8
years anyway.  (I would be glad to post the relevant chapters of my
decade-old book that spells all this out if there is any interest in the
practical details).

4. "Market socialism would exhibit 'massive structural unemployment,
technological stagnation, a chaotic political auction of capital and
recurrent episodes of authoritarian intervention by the central government
to prevent or redirect the abuses of the worker-cooperatives...market
socialism is an unhappy half-way house between socialist central planning
and the key institutions of market capitalism.'"

What is this supposed to describe?  Who is suggesting Yugoslav marxism?  If
no one is, then TG should address real suggestions.  The description has no
resemblance to Mondragon or to the way industrial partnerships function in
the West.






Thomas Brandt <tbrandt@dbedt.hawaii.gov>@cog.kent.edu on 05/24/2000
10:52:14 PM

Please respond to ownership@cog.kent.edu

Sent by:  owner-ownership@cog.kent.edu



To:   Ownership@Cog.Kent.Edu, Homestead@Cog.Kent.Edu,
      Tbrandt@Dbedt.Hawaii.Gov
cc:

Subject:  OWNERSHIP: No 3rd Way?



 Attached is a summary excerpt from Anthony Giddens book entitled Beyond
Left
and Right (1996).  This guy is supposedly British PM Tony Blair's
intellectual
"guru", and much of his thinking--for better or worse--has also been
labelled
"third way" or "radical center".  As you'll see from this excerpt, his
awareness
of "third way" economic alternatives is extremely limited.

All comments are welcome.





(See attached file: Giddensx)



      ______________
      David Ellerman
      Economic Advisor to the Chief Economist
      World Bank, Room MC4-335
      1818 H St., NW
      Washington, DC 20433
      Ph: 202-473-6368
      Fx: 202-522-1158

Attachment: Giddensx
Description: Binary data