The two key terms in the discussion ‘ownership’ and ‘post-collectivism’ are notoriously difficult to define. Perhaps I can give a better account of my position if I approach it from standpoint of ‘post-collectivism’.
In standard political (and I think economic) thought, collectivism is synonymous with collective, usually state, ownership of the means of production,distribution and exchange.Individual ownership is confined to consumer goods. Soviet Communism is the main historical example, but Clause 4 socialism aspired to this. Individual ownership of productive resources is the antithesis.
In my book, The World After Communism, I gave a broader definition.It seemed odd to say that Nazi Germany was not a collectivist society, even though the means of production were (mostly) privately owned. So I followed Hayek, in calling collectivism ‘the deliberate organization of the labours of society for a definite social goal’.The focus here is not on ownership but on decision-making. This fits both Nazi Germany and the Soviet Union. It also obviously fits Britain in the second world war.Whether the means of production are privately or publicly owned is secondary.Public ownership is one of a number of methods for enforcing central decisions or ‘collective choice’. Terror is another.Systems of taxation and regulation can be used for the same purpose.
Hayek’s usage has the additional advantage of isolating a key feature of modern systems of collective decision making , namely that they are, or claim to be, in service of ‘definite social goals’. This distinguishes them from traditional societies in which collective rights generally override individual ones. For example, the Russian mir or village commune had no goal other than to maintain a pre-existing property equilibrium among its members.And we find the same social arrangements writ large in the frozen empires of the Incas and the Aztecs.
[The distinction between the traditional and the modern is not always clearcut. Equality, the distinctive socialist goal, sometimes looks back to a mythical golden age. Economic development, on the other hand, is a ‘social goal’, which has no counterpart in traditional societies.]
I got into a great deal of trouble from some reviewers of my book for my claim, which I took to be self-evident, that the 20th century was an ‘age of collectivism’.They thought that I was somehow equating the mixed economies of the welfare state democracies with the totalitarian systems of Soviet Communism and Nazi Germany. I had hoped to avoid any such implication, but obviously I did not succeed.I was simply taking my cue from Hayek’s idea of the ‘slippery slope’. His contention was that once society’s self-regulating mechanisms -centrally but not exclusively the market system -are damaged beyond a certain degree, governments will be driven to take more and more responsibility for, and power over, the lives and activities of their citizens.
Hayek believed there was no stable half way house between collectivism and individualism. Democratic planning was an oxymoron. What Hayek called ‘corporativism’ would either drift towards statism or degenerate into robber baronage.
In my book, I argued that there was a collectivist drift in the Western democracies in the 1960s and 1970s, which was put into reverse by Thatcher and Reagan. But what struck me most was the global character of de-collectivisation, and its concentration in an astonishingly short space of time -roughly from 1980 to the early 1990s. To my mind it is simply myopic to deny this ‘long decade’ the character of a watershed.What we confront is the extraordinarily swift diffusion of beliefs inimical to collectivist projects, and the start of their dismantlement. Globalisation captures one important aspect of this –the opening up of economies to international competition.Quite straightforwardly, the ability of governments to plan and coerce was severely reduced. Why this happened, why it happened in such a short space of time, why it was worldwide in character, has yet to be fully explained.
What does de-collectivisation entail? Most obviously, I think, shrinking the scope of central decision making. We move back towards the position of the 18th century political philosophers and economists which sees government essentially as a contrivance to facilitate the pursuit of private goods by citizens..Public ownership is dead as an idea, and dying as a fact. De-regulation of economic activity has been proceeding, more strongly in some areas – money, trade, services,communications – than in others, such as labour markets.In some cases, like public utilities, regulation has substituted for public ownership. It is only a matter of time, I think, before sizeable chunks of the welfare state, now handled through collective choice, will be privatised. It is starting to happen in pensions.The attempt to use the welfare state systematically to redistribute income and life chances -always stronger rhetorically than in practice -will increasingly fall victim to tax resistance.
The substitution of private for public goods takes cultural forms which I personally regret. When I saw the lead story in The Times last Friday – ‘Blair’s Trip Clouded by Cook’s Love Life’ – my first reaction was ‘This is a world adrift’. Very few events are now newsworthy which do not contain a strong life-style content.I still can’t rid myself of the feeling that Mr. Blair’s trip is news, and Mr. Cook’s love life isn’t. Yet this kind of headline,too, seems to capture an aspect of post-collectivism. The public sphere has shrunk relative to the private sphere.
I have said very little so far about ownership. The opposite of public ownership is private ownership, and it might seem that there is little more to say.Most people understand the difference between owning and not owning something. Of course, private ownership is always a matter of degree.The right to exclude and the right to use one’s property are subject to law. From the economic standpoint, the crucial right of proprietorship is the freedom to transfer or dispose of one’s property. This is the legal precondition of the development of a market economy. In the writings of modern growth theorists like Douglass North, ‘well specified property rights’, those which enable the owner to capture the gains of a wealth-increasing activity, are the most important cause of the growth of economies. It was the move from poorly to well specified property rights which marked the end of feudalism. How then do we explain the current fashion for reviving poorly or incompletely specified property rights?
This attempt currently travels under the name of ‘stakeholding’. The central idea of ‘stakeholding’ as I understand it is not that ownership rights should be redistributed more equitably, but that they should be redefined, so as to make possible multiple ownership of productive assets. Thus managers of companies should be accountable for their decisions not just to shareholders but to employees, customers, suppliers, the local community and so on. These other groups are to be regarded in some sense as ‘owners’ of the company. Before I explain why I think this is a thoroughly confused and confusing idea, let me say something about why I think it has arisen.
The stakeholding philosophy is basically an attempt to replace the defunct mechanisms of social democracy. In the classic English political economy allocation was to be handled by the market system, but distribution was seen as a matter of political choice. Crosland reasserted this tradition when he argued, following Galbraith, that ownership of assets was irrelevant (since managers, trade unions and governments now called the shots); what mattered for equality was the state’s taxing power.Reliance on the state’s taxing power also underpinned the Beveridge Report.
These twin pillars of social democracy have crumbled away. The countervailing power of governments and trade unions has weakened, while shareholder power has become dominant. The state’s tax base is under strain, while the ideal of equality it was meant to serve has lost its appeal. The wrenching and disruptive forces identified by Karl Polanyi in his classic account of the 19th century have returned, while the statist instruments developed to check them have become increasingly unusable.
What seems to be left is the idea that, statism having failed, some of the state’s duties should be assumed by property: as Gamble put its ‘ownership as stewardship’. This appeals to a number of more or less submerged traditions right across the political spectrum: to the paternalism of traditional Conservatives; to the profit-sharing and co-partnership ideas of Liberals; and to the traditions of Christian and guild socialism on the Left. In essence, a new ‘middle way’ between individualism and collectivism is to be sought not through the external controls of government, but through a redefinition of property rights.. Notice this is quite different from identifying an owner, and placing limitations on his right to exclude, exploit, or transfer.
Why do I find this idea confused? Because it seems to me to confuse two separate notions: that property rights should be multiple, and that they should be ‘fuzzy’.
In traditional societies the two tended to go together. In pre-revolutionary Russia, for example, rights to a piece of property were shared, in some unspecified way, by the peasant, the village commune, the landowner, and, ultimately the Tsar.A modern example is the TVEs (town and village enterprises) in China. This kind of system makes sense in traditional societies where social relations are stable, legal consciousness undeveloped, and the individual submerged in the community.
Indeed, those who have ‘fuzzy’ property rights in mind think of stakeholding mainly as a way of restoring a Gemeinschaft, a sort of extended family. It often goes with the idea of recreating communities based on trust rather than on contract.I just don’t think this can be done in the extended societies in which we now live, societies based on law, not on custom. It goes contrary, for one thing, to the extreme individualism which now exists in the sphere of morals and culture –a case of the ‘cultural contradictions of capitalism’ even more flagrant than that detected by Daniel Bell twenty years ago.
People like John Kay argue the case for multiple ownership on efficiency grounds.. A firm which tries to maximise stakeholder rather than shareholder value will be more profitable in the long run. Shareholder capitalism is seen as short-termist. Stakeholder capitalism would be more likely to equalise the private and social rate of return.
There seem to be a number of serious weaknesses in the argument. First, it is not clear where the market failure in shareholder capitalism arises. Gamble and Kelly accept that to justify government intervention there must be market failure. But they fail to identify a single one. Of course some institutions are more successful than others. Why not leave it to competition to select the successful forms of corporate governance? Otherwise government is back in the old (and failed) business of picking winners.
Secondly,it is simply wrong to say that investment in human capital is not rewarded by shareholder capitalism. Its reward is higher pay. Employee share-ownership may have all kinds of advantages, but these do not involve a redefinition of ownership.
My main criticism of stakeholding is that in a society with a sophisticated legal system, any extension of claims on a single property would necessarily go together with an extreme precision in the specification of the rights being claimed.This would be a hefty tax on business efficiency. There is an interesting example in chapter 11 of the American Bankruptcy Code of 1978, which gives legally enforceable rights to debtors in physical possession of a bankrupt company, including suspension of all payments of principal or interest on loans. This is a stakeholding idea, since its object is to guard against premature liquidation of a company in the social interest. But it does not take us back to the world of Gemeinschaft but straight into the entrails of the legal system.
In short, I see no compelling reason to support the ‘new politics of ownership’.The attempt to create a new Gemeinschaft through ‘fuzzy’ property rights is an illusion. The efficiency argument for multiple ownership has not been established. On the contrary the proponents of the multiple ownership have not, to my mind, paid sufficient attention to the costs of emmeshing the conduct of businesses in the legal system through the ever more elaborate specification of property rights.
While I think I understand why particular ‘middle way’ has recently come to seem attractive, I believe it will turn out to be a chimaera. Moreover, it diverts our attention from a much more pressing task: to develop a new framework of rules in which the freedom to trade privately owned assets is not allowed to break up economies.