Contributory paper to Capital Ownership
Group Strategy Meeting, 6-8 May 2001, by Vic Thorpe, Just Solutions, Belgium
Earlier this month, Ferrari opened a new motorcar showroom in Jakarta, Indonesia. It contains ten Ferrari Monza 360 F1’s at $400.000 each (twice their price in the USA, incidentally) and ten Maseratis at a mere $180.000 apiece. Even before the showroom opened, four of the Ferraris and two of the Maseratis had been sold and the distributor is concerned that he may run out of stock before replacements arrive.
A ten-minute Ferrari-drive from the showroom, in one of the export processing zones surrounding the city, young women (some no more than children) produce sneakers for a leading global brand at an hourly rate of 18 cents for a 60-hour week, less fines for going to toilet or speaking during working hours. If they should become pregnant, they lose their jobs, which they desperately need in order to send money back to their impoverished families in the villages. Unions are banned from the export-processing zones and precious few Indonesian workers belong to independent labor organizations in any case. National per capita income in Indonesia is around $700 per annum.
Average CEO ‘compensation’ in the USA increased by a thumping 17 per cent during 1999 to average $12.4 million. This means that America’s CEO’s now receive, on average, 476 times the pay of a typical American worker (about $30.000). At a generous estimate, no more than 17 per cent of all American workers belong to labor unions.
In a textile sweatshop in New York, illegal immigrants were, at the same time, producing garments for nominal pay that were destined for sale in Wal-Mart stores. They never saw their pay and never left the building in which they worked, because the costs of their being smuggled into America, the small premium paid to their families back home and the meagre costs of their upkeep in New York were said to equate more than their income. They were modern slave workers of the competitive economy.
The global retreat from social justice demonstrated in these and similar anecdotes and statistics causes profound reflection among institutions established to achieve fair distribution and social solidarity. Foremost among these self-questioning institutions are labor unions, which have seen their memberships and their influence decline in the face of competitive ‘globalisation’. At national level, labor unions have been forced to concentrate their primary resources to dealing with the minutiae of rapidly changing technology inside the workplace, or to negotiating the best deal for those who remain after the latest round of closures and redundancies. For those structures of labor that were established specifically to improve solidarity and social justice between and among nations at the international level, the evident failure simply to prevent a worsening of protections for workers worldwide is a fundamental challenge to their utility and existence.
At the same time, human rights groups, women’s movements, environmental organizations and development NGO’s now occupy ground that previously gave breadth and a wider social purpose to a labor ‘movement’. If the trend continues, unions risk becoming single-issue groups themselves - concerned with money-wage compensation and job protectionism at the company or sector level. Furthermore, the new organizations of social solidarity seem to operate almost seamlessly across national borders, as befits the issues and the age. Protectionist sentiment raised by job and role insecurity, on the other hand, puts strains upon labor’s traditional internationalism.
The central dilemma for labor is to determine a reasoned and unequivocal response to the globalisation of corporate power and the consequent lessening of effectiveness of traditional political routes to social improvement. Social democratic and other labor-associated parties in government have proven no more capable of bringing about social justice against the tide of global corporate interest than avowedly business-sponsored ones. The political apparatus at national and intergovernmental levels reiterates the same message: ‘There Is No Alternative’ – what has come to be known as the ‘T-I-N-A’ response.
Labor at the international level is currently unsure of its response to ‘TINA’. On the one hand, in the aftermath of the dismantling of the only system that utilized a socialist rhetoric, it fears that TINA may be right. If so, the responsible road for labor is to engage inside the intergovernmental transmission belts of globalisation – WTO, WB, IMF – in order to ensure that whatever transformations are unleashed will be carried through with a maximum possible of inbuilt social protections for the disadvantaged. Engagement with or appeal to some kind of political apparatus has also become the conditioned response of many labor leaders over the years.
On the other hand, there is an uneasy acknowledgement that a process that has already created such inequalities and repression may have no place in its heart for unquantifiables such as justice and human rights. If that proves to be the case, then opposition rather than engagement should be the response. But a return to postures of struggle that hark back to the early days of labor organization would require the development of a strong and coherent set of policy alternatives that is not as yet formulated.
‘Teamsters and Turtles – Together at Last’ read a banner on the second day of the watershed 1999 Seattle demonstrations against the WTO. International labor’s official demands were for inclusion in the discussions and the introduction of a raft of social and environmental clauses into a set of documents aimed at making the world yet safer for multinationals to live in. The members (and some of their most notable leaders) on the streets were clearer in their language – ‘WTO – Hell No!’
Seattle was one of the first occasions on which the new alliances that are being formed between labor and the wider social change movements at every level came into the public eye. Its timing in terms of the debate taking place within the labor movement was impeccable. It destabilized the comfortable and gave new spirit to the radical. The outcome has been the engagement of a ‘Millennium Debate’ on future positioning within the main centers of labor internationalism – the ICFTU and the international federations - and the renewal of militancy from other labor groupings that will whip its flanks.
The over-mighty role now played by corporate power over economics, politics and social policy is everywhere being scrutinized. Non-state organizations now exert decisive power over the lives and destinies of governments and people across the globe. If the world social economy is changing to such a degree, can the corporation alone stay unchanged? This seems unlikely. Corporations are trying to respond to their ever-more-vocal critics by accepting a responsibility for ethical, environmental and social concerns that were previously the exclusive realm of government. One school of academic thought describes the corporation as the successor to first the church and later the state as the dominant institution of the age. In response, capital ownership is being challenged and new rules for the validation of authority will be created.
Before investigating the impact of worker share ownership ideas on the international labor movement, it is worth a brief description of the basic institutions that constitute labor’s international representation. There are three main categories of organization that have developed over the years to draw together labor’s differing national strands into a more coherent representation at the international level.
Individual national trade union organizations usually (though not inevitably) affiliate to one or more national centers, or confederations – such as the AFL-CIO of the USA, the TUC of Britain, or the COSATU of South Africa, for example. In some countries more than one such national center has emerged to express differences in political, or sometimes religious, ideology. International cooperation between the various national centers was complicated during the Cold War period by the emergence of rival groupings, emphasizing alleigance to one or other political philosophy. Now, however, the dominant world organization that groups together the overwhelming majority of national trade union centers is the International Confederation of Free Trade Unions (ICFTU – due for a name change?), based in Brussels and encompassing the leading national trade union confederations in some 148 countries. The formerly Moscow-dominated World Federation of Trade Unions (WFTU) has shrunk dramatically over the past decade to a point where it no longer publishes membership figures and the World Confederation of Labor (WCL) remains a pole of attraction for unions representing some 25 million workers from areas of the Third World where availability of development grants from church groups has maintained a divided labor movement. For all intents and purposes, therefore, the ICFTU and its associated structures can be taken as the expression of labor efforts at the international level. Its member organizations from the OECD countries group also in the Trade Union Advisory Committee to the OECD (TUAC/OECD) for representation within its deliberations.
The rise of the European Community economic regionalization phenomenon and other weaker versions elsewhere has encouraged the emergence of regional labor groupings that have at least the merit of uniting the various strands of labor within a common framework. Of these, the European TUC is particularly worth contemplation for COG attention at this time, since it has a specific consultative role within the EC apparatus and has been involved (not always positively) with the advance of certain forms of employee participation through European legislative action.
Individual national trade unions also affiliate to international sector federations that undertake solidarity, informational, representational and training/development work at the sector levels. These are still known by the archaic name of International Trade Secretariats (ITS’s) and exist for diverse trades, such as metal workers, textile and garment workers, journalists and teachers. Over time, several have merged into broad industrial and service groupings – such as the Union Network International (UNI), now covering banking, insurance, distribution, graphics, telecommunications, entertainments and a whole host of other service occupations, or the ICEM, covering chemicals, pharmaceuticals, paper, rubber, glass, ceramics, cement, oil, gas, electric power, mining, diamonds and other general industrial trades. At last count there are ten ‘internationals’, that operate in more or less close association with the ICFTU, but are not, at this time, formally affiliates of it.
Within the UN family of organizations, the organ with which labor has its most important linkages is the International Labor Office (ILO), based in Geneva, Switzerland. The first of the UN organizations to be founded in 1929, even prior to the League of Nations, the ILO has a unique tri-partite structure in which its conventions and policies are debated and decided between representatives of government, industry (via their representative associations) and workers (via their representative trade unions). Although voting strength is skewed, with double-strength voting for governments, this does give an opportunity for airing concerns, meeting with employers on neutral ground and placing individual governments before their moral responsibilities. Over the years, international ‘conventions’ have been negotiated between the parties regarding government responsibilities to ensure justice in social and industrial affairs. Recent discussions have focussed attention on certain so-called ‘core’ conventions, dealing with the right to form and to join trade unions, the right to bargain collectively with employers, freedom from forced labor and child labor and equality of opportunity in employment.
The rise in corporate power globally since the late 1960’s compelled the organs of labor (some sooner, some later) to re-focus from largely sectoral and governmental concerns towards dealing directly with multinational corporations. Although this has been the work mainly of the industrial sector federations (ITS’s), the ICFTU has latterly joined the work to create a more concerted program that includes calls for monitoring and limiting action by the UN and other international agencies. However, the sharp end of this work is the attempt by the international federations to negotiate global accords with individual companies that cover their deportment as employers across their worldwide operations. These new global agreements feature centrally the above-mentioned ‘core’ conventions of the ILO and seek their imposition at the level of the company. Importantly, for the issues that concern the COG, some of them also deal with matters of internal information exchange between management and workforce and with advance warning and discussion over long-term investment and policy goals. Further advances along this path could lead to such agreements becoming vehicles also for the spreading of worker involvement in key decision-making and, why not, ownership?
Current International Labor Attitudes to Worker Ownership
I use the term ‘worker ownership’ in preference to ‘employee ownership’ to capture my own sentiment of what is a key difference in approach. The difference also underlies some of the nervousness found in trade unions worldwide towards ideas that workers should take a participative approach towards the management of the undertakings in which they work. ‘Employee ownership’ still tends to situate the worker as object of the process by emphasizing his/her role as employee. ‘Worker ownership’, at least to my ear, opens the door to a new relationship to production and work organization.
Worker ownership of the means and processes of production was a central demand of the trade union pioneers (along with their vision of ‘abandonment of the wages system’), yet very few unions have current policy to reinforce such an aim. One of the few national union centers that does espouse ‘worker control’ is the COSATU of South Africa; but to date this has mainly been an issue of control over the apparatus of class organizations and politics than over the processes of production itself. Outside North America, where a pragmatic approach has led to a mixed but open-minded acceptance of ESOP’s as a possible route to job retention and enterprise survival, most unions view the issue of employee or worker share ownership via the narrow lens of pension systems. When confronted with a direct buy-out option, most tend to shy away through a mixture of lack of practical know-how and ideological opposition.
Sometimes this opposition is based on bad experience. For example, the German trade union view of share participation is strongly colored by memories of the scandal and collapse of Neue Heimat, a wholly trade union owned construction, housing and insurance conglomerate, in 1982. The lessons that might have been gained concerning the necessity for greater internal democracy and the need to develop a specifically worker-directed culture were swamped by the sheer scale and shame of the disaster. The ‘co-determination’ system of (limited) participation in decision-making at the company level has since sufficed as the ultimate expression of German trade union aspirations in this regard.
In the U.K., the ‘worker control’ movement of the 1970’s gave rise to ideological ventures, such as the Triumph Meriden cooperative, that were not prepared to tackle the very real business issues at the root of the enterprise. Failures of this kind set back a whole generation of possible trade union advocates.
However, the equally real successes of some of the US ESOP’s, of Mondragon, of Scott Bader and other both recent and long-running worker-owned firms, should have provided sufficient fuel for a greater debate than has been the case. There are other concerns at work here.
First, there is a real fear of role conflict. Unions are used to a world in which it is management’s job to manage and the union’s job to criticize and to negotiate for a larger share of created wealth. When the union or its members are also owners, whom then shall we criticize and who shall decide how the wealth shall be allocated? This looks like a responsibility too far.
One feels there may also be an underlying psychology that workers are inevitably the underclass of the production process and need the union to defend them in this exploited state. If worker ownership of production demonstrates a path out of simple wage slavery, the existence of the union is jeopardized. Though few would frame the argument in this way, it is a powerful vision of role redundancy.
There is, of course, a response. The union could lead the restructuring of ownership and production, taking the current wave of privatisation and anti-corporatism as its cue. It could also reverse the transmission belt to the social democratic politicians and pressure them to include workers as natural stakeholders in plans to ‘communitize’ – rather than ‘privatize’. Further, it could use its position on the boards of centralized pension plans to form a capital pool that would support worker buy-outs. And it could make training for worker ownership a part of its regular education effort. These new departures would update the appeal of trade unionism at a vital moment.
Closely allied with this concern, however, is the past tendency of labor, especially in Europe, to rely upon the Party as its instrument for obtaining social justice. The formation of labor-associated parties was accompanied by expectations that, once in government, they would lead a transformation of wealth and power in society, including the control of the primary means of production to be used in the interests of all the people. Since the people would control the party of government, it was felt that the democratisation of industry would be complete. The abandonment of any such aims by these parties in government and their recent enthusiastic embrace of privatisation policies, have dented but not entirely dimmed this view of the political road to democratic control of industry.
Frequently these fears are expressed as a concern that the process of collective bargaining would be undermined by worker involvement in ownership. These fears are exacerbated by management attempts to use employee share participations to soften the edge of wage negotiation. The use of share participation schemes as motivators to increase performance and productivity tends to put them once again in the category of management tools that are removed from the union bargaining sphere. At the same time, the use of share option systems as management incentives has usually led to attempts to boost productivity and share price through huge job cuts and is a contributory theme to the ongoing industrial crisis for workers and their unions. This has added weight to the bad name of share participation.
There is also a very practical ignorance of how various techniques may be used to enhance worker ownership without endangering pension entitlements or other benefits. The common view is that workers will be encouraged to ‘put all their eggs in one basket’ by mortgaging their pension fund and thereby risk their relatively puny assets to keep afloat an ailing company. Many past attempts are viewed as exercises in self-exploitation.
However, there has recently been a recognition in labor circles internationally of the need to reassess trade union tactics for reasserting social justice within the global economy. The ICFTU, challenged by its American affiliate, is undertaking a full review of its mission, structures and strategies within what is termed a ‘Millennium Debate’. There are hopes that it may lead to a review of some basic principles and lead to some fresh thinking and opportunities.
The ICFTU and those international federations that closely follow its political lead have begun to recover from their earlier confusion in the face of neo-liberal and ‘free trade’ economics. More profound proposals have been argued into policy – including such elements as an international Tobin tax that has already been discussed by the COG Homestead group. One further aspect of this reappraisal has been the formation of a Capital Strategies Working Group within the ICFTU ad hoc committees. This has brought together the international federations, national center affiliates, the TUAC/OECD and the ICFTU regions and secretariat to consider innovative use of trade union pension holdings to increase control over the general ethical behaviour and union-friendliness of companies. Although the work of this group has so far revolved around the probable impact of government pension-funding ideas and the desirability of using shareholding power to add impact to campaigns for corporate responsibility, it is a relatively small step from such considerations to a wider view of company control.
Spurred by the desire to create new job opportunities and incomes for the vast numbers who struggle for existence at the margins of an increasingly divided society, trade union concerns mirror very closely the central aims of the COG:
- reduce inequality of income and wealth;
- increase sustainable economic growth;
- expand opportunities for people to realize their productive and creative potential;
- stabilize local communities by improving standards and enhance the quality of life for all.
The opportunity to place worker ownership of the means and processes of production back on labor’s agenda has not been so great at any time in the past thirty years. Groupings such as the Global Labour Institute (GLI) and the International Federation of Worker Education Associations (IFWEA) have begun to raise fresh debates around the topic in order to encourage the formal union structures to consider these questions more thoroughly.
The ILO puts a very low priority on employee participation issues and deals with them, if at all, as motivational management tools, or as cooperative village enterprises at the micro level. Jan Vanek’s studies of Yugoslavian systems carried out from within the ILO during the 1970’s have been all but forgotten. Support would be needed from the international labor groups to call again for research and support efforts for a modern re-appraisal of worker ownership. But there are a few individuals within the ILO structure who retain a personal interest in these questions. If the COG can find a foothold among the international federations or in the ICFTU, it will be worth making efforts to revisit this territory.
A further opportunity arises to reach out to new groupings espousing democratic reconstruction and decentralized self-organization. The strands of new social influences are being woven together. The foundations of 21st century society are being reviewed and renewed. Notions of democratic ownership and control have a key role in this debate. They might also be considered as pertinent additions to COG’s goals and are surely not opposed in the full realization of its aims. They do, however, mean taking a broader view of worker ownership than is often the case in limited stock option or minority participation scenarios.
Stability of the existing social order rests on the willingness of people as a whole to be governed according to the prevailing rules and customs. When the consent of the governed is placed under strain, social change takes place – gradually where it is heeded by wise leaders, or as revolution where it is resisted. One need look no further back than a decade to observe that truth at work on a large scale in Eastern Europe or in Indonesia today. Francis Fukuyama, in his latest book, ‘The Great Disruption – Human Nature and the Reconstitution of Social Order’, puts this process lucidly:
“The study of how order arises, not as the result of a top-down mandate by hierarchical authority, whether political or religious, but as the result of self-organization on the part of decentralized individuals, is one of the most interesting intellectual developments of our time.”
The upsurge in demands for greater decentralization and rejection of top-down politics and economics that has arisen over recent times is a manifestation of an underlying dissonance within the prevailing social order. Challenges have arisen from a wide range of constituencies: alongside displaced workers and their families stand environmentalists, indigenous groups, third world development groups, social responsibility advocates and ethical investors – what has been termed ‘the NGO swarm’. All share a desire to see the emergence of an alternative to ‘globalisation’ – perceived as the exercise of untrammelled power over the lives of ordinary people – and an enhancement of democracy at the personal level.
Labor has begun to build alliances with these groups around issues that affect its members and will be changed by its experience of joint campaigning. It is being forced to revisit arguments and visions that have not been debated or dreamed since the early days of trade union history. To realize the goal of a more democratic society, the workplace itself must be democratised, since that is where a still substantial number of citizens spend the majority of their time. Both the institutions of labor and the advocates of worker ownership therefore have an essential role to play in reconstructing the new economic and social scenarios that are being demanded.
These are natural new constituencies for the vision of worker ownership. It is necessary to reach out to these elements in the unfolding debate and to make the case more publicly than has been done so far. The Organised Labor listserv debate has been an uphill struggle because the medium relies to a large extent on the positive interest of those in the trade union movement who are ready to consider worker ownership as a prospect. The medium does not take the debate outwards to challenge the predominant apathy or opposition.
Workers and their representatives depend primarily on practical examples to advance their understanding of and confidence in new concepts. Clear case studies of specific takeovers, training materials and worker ownership ‘business games’ need to be developed as a priority, if COG is to help advance this process among the unions. These would assist trade union educators and such bodies as the IFWEA to spread new images of worker ownership across the movement. Fred Bowden, Chief Executive of Tullis Russell paper company (established with David Erdal’s assistance, I believe) spoke at last week’s EFES conference about his use of just such a business game to train workers within that worker-owned firm.
A conference on Worker Ownership as a response to economic restructuring and privatisation could be specifically targeted at labor unions. If it dealt with labor’s hopes and fears in a realistic and practical manner it would greatly help to raise the temperature of this debate. It may be possible to undertake such a conference together with one or more trade union national centers, and/or with the IFWEA and GLI. Funding may be discussed with one of the traditional development funding organizations, like the Dutch FNV center, or the Swedish LO/TCO solidarity organization.
Incursions should also be made into the territory of other social movement groups in an attempt to engage their help to build ideas of workplace democracy into the new politics. Greenpeace, for example, has still not given up on its alliances with labor to neutralize worker opposition to industrial ‘greening’ by discussing sustainable alternatives and the policies of ‘just transition’ necessary to achieve them without mass job loss. Its natural espousal of community-based politics and of decentralized solutions makes it a good audience for notions of worker and community ownership. Discussion of mutual interest may also broaden and enrich thinking on worker ownership.
Earth Summit 2002 is now being prepared to debate progress on the sustainable development Agenda 21. COG should make contact with the UNED and with other participants (including the labor internationals) to ensure that briefing papers contain mention and examples of the contribution made by worker ownership to economic and social sustainability. Although timing is late, we should at least aim to emerge from Earth Summit 2002 with an enhanced profile for worker ownership issues within the development debate.
Social responsibility groups such as Global Reporting Initiative, SA 8000, Clean Clothes Campaign, Ethical Trading Initiative and others have already reached out to labor and ethical investment groups in a bid to bring large corporations to account (literally) for their global behaviour. Ethical investors dispose increasingly important volumes of funds in USA, Europe and Japan. Workers’ pension funds are a significant portion of that money. Trade unions are beginning to realize the potential of voting strength given to them by these holdings and to develop strategies for deploying these funds. The idea of using some part of these funds to encourage and support worker owned enterprise is not a new one, but may find a more sympathetic ear in the ethical investment community. It is also clear that the presence of workers within the controlling levels of the company can forestall many of the excesses and corruption that ethical investors seek to prevent. I would like to see sessions planned within the forthcoming COG conference that try to involve representatives from all these constituencies. I also feel that a theme that promoted the appeal of worker ownership as a viable and practical alternative to global corporatism would draw interest from labor groups themselves.
As tension mounts between the old structures of governance and the new and revived streams of social action, new fora will emerge where the old and new social movements can seek out common areas of cooperation, adjudicate conflicts and develop new ‘soft’ institutions that will gain in authority as they assume responsibility for carrying through agreed programs of change. As power responds to the new ‘soft’ forms, so they too will become powerful. Corporations are daily declaring their social and environmental responsibility and claiming to embrace transparency as a new goal. Whatever may be the reality behind these claims, it is significant that corporations that feel powerful enough to defy national governments, nonetheless feel the need to respond to a popular upswelling of discontent at their dominance.
Labor is inevitably a key component in the change process. The trade union institutions of labor’s past will undoubtedly need to modify their stance to cope with the power shift that is already taking place. It is a good moment to focus attention on the place of labor within the corporation – as a stakeholder, as a monitor of good practice, as a factor for social rootedness and as a defender of sustainable operation. The recognition of labor’s natural interest in controlling the purposes and processes of production leads only to the conclusion that trade unions should maximize their ownership of the means of production. COG needs to reach out and make that argument more forcefully to labor directly. In doing so, it will need to be aware of the shift in the locus of power in modern society from government to the corporation and to take advantage of this fact to strengthen its argument for democratisation of the over-mighty subject.