ourEconomy: Opinion

To make public ownership truly democratic, we need to transform the state

The new UK Labour leadership should not abandon the party's commitment to economic democracy.

Hilary Wainwright
13 May 2020
NHS worker walks past the new Banksy art work. Democratising public ownership means valuing public sector workers' knowledge.
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Andrew Matthews/PA Wire/PA Images

This article is part of ourEconomy's 'Public ownership in times of coronavirus' series with TNI.

Today, multiple crises from pandemic to climate can clearly only be resolved through systematic public solutions and capacity. The people in the UK realise this yet find that after decades of austerity and cuts the majority of people are left vulnerable. Public health and collective security, financial and medical, has been destroyed. Even Conservatives are turning to the public sector for solutions to problems of public need. However, our experience in the UK indicates that the public sector itself needs to be transformed. Just because companies are ‘publicly managed’ does not mean that they maximise benefit for the people. Many publicly owned companies are managed in a hierarchical and unresponsive way without transparency and accountability.

We need to envisage more democratic and inclusive forms of public ownership. But how? And what opportunities and challenges does this involve? Critical lessons from the UK’s experience with post- 1945 nationalisation on the one hand and positive experiences of new forms of democratic management internationally on the other might bring us closer to an answer.

The undemocratic state

In the UK, the legacy of the command-and-control hierarchies of the post-1945 state frequently involved a narrow and elitist understanding of what public management entails. Without proper mechanisms for democratic control, it became a management model which ended up serving the interest of the ruling elite. Rather than opening a public debate about what ‘commonly-owned’ meant in practice, the nationalisations were mostly viewed as an efficient way to reconstruct the UK economy post-war. They were generally run on a commercial basis, partly to provide an inexpensive infrastructure for the private sector. With specialised professionals having operational responsibility accountable only indirectly to ministers, they faced little public scrutiny.

In many ways this opaque elite regime in the nationalised industries should not be a surprise, given the nature of the British state. The Labour Party inherited, generally uncritically, a state constructed and adopted to manage an empire, not to empower citizens – indeed the people were, and still are, legally ‘subjects’ not citizens. Here we touch upon a first condition for transformative public ownership; it requires a democratic state.

Conditions for new public ownership

Policy thinking in the Labour Party began to change in recent years, with the radical leadership of Jeremy Corbyn and John McDonnell. ‘We should not try to recreate the nationalised industries of the past […] We cannot be nostalgic for a model whose management was often too distant, too bureaucratic.’ At a Labour party conference in February 2018, John McDonnell, then British Labour Party’s Shadow Chancellor of the Exchequer, warned against the dangers of adopting a public ownership model with no explicit social objectives and without the democratisation of its means of administration.

To talk about the democratic structures of the state in relation to public ownership means to talk about a democratic constitution and its objectives. This matters, as there is a great difference between a constitution whose goal is to protect collective rights and strengthen the public sector, and one where public enterprises are seen mainly as a convenient way to increase the state’s revenue. In the former, public companies are a central means of intervention in the market and their investment strategies and employment policies are used to further social goals.

A good example can be found in Uruguay. Here, the vision of a democratic society is explicitly part of the constitution, social objectives written into the missions of public companies which are understood, by policy makers and the population, to be an integral part of the Uruguayan democracy.

Valuing citizen knowledge and capacity

Founded on pro-public, democratic principles, Uruguay's constitution was strengthened after the successful struggle against a directorship. It establishes a fundamental framework for democratic public ownership. With this as a baseline, we will now turn to how democratic principles are translated to the managerial model of public enterprises. There are numerous experiments in establishing democratic governance in public enterprises, for instance ‘Workers on the Board’ can be a good step forward. However, such worker representation alone is not generally sufficient to change the balance of power between management and worker. A real change in the relations of production thus remains limited.

Going beyond board representation, the Labour Party seeks to advance a new democratic form of management that values practical knowledge and skills of citizens and workers by involving both front line workers and service users in day to day decision-making. This requires a profound cultural shift in the attitudes and strategies of the public sector and in the consciousness and self-confidence of working people. Those who produce knowledge should be at the core of the design and operation of services, as McDonnell argues, ‘nobody knows better how to run industries than those who spend their lives with them’. This radically democratising approach of the Corbyn-led Labour Party was very popular and there is every reason why the new leadership of the Party should continue to keep them in the Party’s programme for government.

Collaboration from below: the experience of community wealth building

Since democratic public ownership for the 21st century involves collaboration between public institutions, citizens and workers, we can learn a lot from the experience of ‘community wealth building’ – a democratic form of community economic development with roots in the US. In the UK, the community wealth approach is now part of the so-called ‘Preston Model’ developed by the city of Preston after local authorities were let down by a private partner in a major regeneration project in 2008. Preston is now collaborating with other public authorities in the region to support local, unionised, and democratic enterprises. The model has been praised by both national and international media, and offers an important building block for further systemic change.

All in all, these experiences demonstrate that democratising public ownership requires more than institutional engineering. To shift the balance of power towards front-line workers and affected communities, we must also strengthen the role of worker's and citizen's organisations in shaping this transformation. These cannot be mere ‘participants’ – a democratic dynamic can only be realised if there is a conscious movement for industrial and service transformation coming from workers and communities themselves.

A longer version of this article appears in the TNI book The Future is Public, which can be downloaded free of charge here, and includes 15 full-length stories contributed by remunicipalists and de-privatisers around the world.

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