Guy Standing

If there is one area where the Labour Party should come together it is in the strategy to revive the economy of the sea. Under common law, going way back, the sea, the seashore, the seabed and all in the sea belonging to the country are part of the commons, that is, the property that belongs to everybody, equally. Yet the sea has been subject to a greater ‘enclosure’ than land, and has been subject to a process of privatisation and financialisation that nobody who calls themselves a progressive should accept. This will become even more important since the sea is projected to double its contribution to global GDP to over 10%.

Consider a few facts. Since 1982, the UK owns four million square miles of sea under what is called its Exclusive Economic Zone. That part adjoining Britain is three times its total land area. But successive governments have overseen the privatisation of the blue economy and given vast subsidies to corporations, costing taxpayers billions of pounds and enhancing the profits of foreign capital and financial firms.

Take the seabed. It has always been accepted as a commons, with the government and monarchy required to act as the Steward, expected to respect what is known as the Public Trust Doctrine, that is, to act in such ways as to ensure the commons is kept intact and in good condition. So, why has the left kept quiet while the Crown Estate has been auctioning off thousands of square miles of our seabed, earning an income flow estimated to be £9 billion, while selling rights to multinational capital? More auctions are planned. Details are given in my book, The Blue Commons: Rescuing the Economy of the Sea. Labour should make it clear that it will block further privatisation of our seabed.

Then there is fishing. Starting in 1967, the government operates a complex system by which it hands over what are private property rights as ‘fish quota’ to selected fishing companies. A trick played was that the amount of quota given to companies was based on recorded past catches. Until quite recently, small-scale fishers were not required to keep records of how much they caught.

So, when the current system came into effect, they were excluded from the main ‘pool’ of quota. A result is that today just 25 firms own over two-thirds of all the quota, and five families, all on the Sunday Times Rich List, own 29%. They are given virtual ownership of the fish, denying all small-scale fishermen the right to catch much at all. This was not the fault of the EU’s Common Fisheries Policy; the Leave Campaign lied that it was.

Making the situation worse, the government hands out £120 million a year in subsidies, most going to the corporates. And they have treated the law with contempt. Thirteen of the top 25 firms were caught clandestinely breaking the quota rules, catching 170,000 tonnes of illegal excess fish worth £63 million. They received fines but nobody was imprisoned because under British law it is merely a civil offence, not criminal. And they were allowed to keep their quota. The book gives later cases.

The government slashed the budget of the Marine Management Organisation, the body responsible for policing what happens at sea. And there are just 12 coastguard vessels to monitor 773,000 square kilometres – one for every 64,000. This is de facto deregulation. It should be seen in the context of one fact. Because economic growth has been given precedence over preservation of the commons, subsidies have helped fisheries become more ‘efficient’, meaning more fish are taken than is sustainable. As a result, the hourly catch today is just 6% of what it was a century ago. At current rates, our children will have no British sea fish to eat.             

Then there is aquaculture. Over half the seafood we eat today comes from onshore and offshore fish farming. This is another sphere where foreign capital has come to dominate. It is a form of enclosure. Giant fish farms are doing ecological damage, and big companies, most notably the Norwegian Mowi, only bear half the production costs. In Norway, the government is imposing a 40% levy on the cash-flow of such firms. Labour should match that.  

Then there are our ports and harbours. Thatcher privatised all ports, and most have fallen into the hands of foreign capital, much of it Chinese and much controlled by private equity, a form of finance notorious for seeking short-term profit maximisation, asset stripping and ecological disdain. At the time of writing, there is a scandal in the Teeside, where local fishermen have had their livelihoods destroyed by the port owners dredging and dumping 250,000 tonnes of sediment in the sea, killing off crabs, lobsters and other crustaceans. The port and the river authority are run by the subsidiary of a Canadian private equity company. All ports should be nationalised or at least mutualised.   

Then there are the giant cruise ships and container ships. They use the most polluting ‘bunker diesel’ and keep their engines going all the time they are in port. They cause more pollution than all the cars on our roads. Yet they are allowed to do it. A study showed that throat cancer and other ailments linked to their pollution mean that around Europe these boats are responsible for 50,000 premature deaths each year.

Then there are what will be two big ‘blue growth’ areas. Mining in the sea is very profitable and deep sea mining for minerals needed for electric batteries and much more is about to take off on a major scale in 2023, for reasons outlined in the book. Marine scientists are acutely concerned. But mining companies and big finance investing in them are lobbying effectively.

Here is a predicament Labour must address. Under the United Nations’ Convention on the Law of the Sea, adopted in 1982, the International Seabed Authority was to draw up a Mining Code and regulate what happens in the Deep Sea. The ISA was set up in 1994, but after 28 years it still has not drawn up the Code. This is significant, because the Code is meant to ensure that income from the deep sea is shared by all humanity, so that capital is not the sole beneficiary. Powerful interests have ensured the Code does not exist. Labour should demand it be drawn up without further delay.

Perhaps above all, the development of intellectual property rights in the sea should cause all of us alarm, as it relates to what will become a huge part of the global economy. There are already 13,000 patents in ‘marine genetic resources’, vital for future medicines among others, guaranteeing their owners monopoly profits for 20 years. Over 47% of the patents are possessed by one corporation, the German chemical giant BASF; 76% are possessed by three countries, Germany, the USA and Japan. Britain is nowhere. Labour must have a policy to redress that.

Finally, Labour should develop a strategy that combines revival of the blue commons with a shift to what could be called eco-fiscal policy, by raising revenue from levies on profits from activities that use and deplete common resources. The proceeds should be channelled into a Blue Commons Capital Fund, along lines of what has been done in Norway. From the Fund, Common Dividends could be paid out, as a form of common property right, a basic income by another name. It can be done.      

picture credit : Ed Dunens flickr      

Guy Standing is Professorial Research Fellow, SOAS University of London and a Council member of the Progressive Economy Forum. He is author of various books, including The Precariat: The New Dangerous Class and The Corruption of Capitalism: Why Rentiers thrive and Work does not pay.

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No economist should have been remotely surprised by the announcement of the European Super League. Its ignominious collapse could mark the beginning of a long-needed onslaught on the economic model on which it was based.

Today’s economic system is extreme rentier capitalism, where four secular trends have come together – commodification, financialisation, neo-colonialisation and rule by the plutocracy. The political left should develop a strategy for dismantling rentier capitalism, and football might just be the place to start.

Rentier capitalism is the end-game of the neo-liberal economic project that began in the 1980s, led by the zealots of the Mont Pelerin Society and the Chicago school of law-and-economics, under the political tutelage of Ronald Reagan and Margaret Thatcher. It began with financial market liberalisation, by which gradually financial capital came to dominate productive capital. Financial conglomeration, with huge asset managers, hedge funds, private equity and venture capital, has created a stranglehold on the real economy. In the UK, the value (sic) of financial assets now exceeds 1000% of GDP, as documented in the new edition of my book, The Corruption of Capitalism.

As the power and reach of global finance have grown, much of our commons – including iconic football clubs – have been privatised and commodified, in being bought and sold like lemons. This has been accelerated and deepened in every economic crisis, particularly in the austerity era since 2010. And it will be accelerated again by the Covid pandemic slump.

Worst of all, out of rentier capitalism emerged a new class structure, as more and more income and wealth flowed to the rentiers and less and less to those performing or trying to perform labour. It is not just the very top who have done well out of rentierism, but the rent-seeking winners – often indulging in what should be called the crimogenic character of a system based on rentier income – have expanded the plutocracy of multi-billionaires, ideally placed to buy and sell corporations in alliance with private equity.

And so we have what all of us know all too well – football clubs, long regarded as iconic social commons, becoming glamorous symbols of financial control. The tragedy is that this was so predictable, and yet the political left has not only not done anything when in office but has also failed to articulate a strategy for dismantling rentier capitalism. On the contrary, they have aided and abetted financialisation and increased or sustained vast subsidies, obsequiously encouraging plutocrats to come and stay, allowing private equity to buy and control our commons, pursuing low corporate tax rates, and so on.

The tragic neo-colonisation of British and European football clubs is now so extensive that dragging it all back into a commons will be incredibly difficult. But at the very least we should be saying that is the direction in which we wish to go. At least have the courage to stand up; you might find that would be very popular.

The starting point is the reality that most of our leading clubs, and a surprising number of smaller clubs, are wholly or partially owned by Russian oligarchs, middle-eastern Sheikhs, Chinese or other Asian billionaires, and increasingly – and perhaps most threateningly – US private equity capital.

The six super clubs in the Premier League that flirted with the ESL are actually on a financial knife-edge. In the past year, in aggregate they paid no tax, although Chelsea paid about 8% of gross profits and Liverpool 21%, both because they had not burdened their operating company with debt. Tottenham made a gross loss before tax of £68 million and Arsenal made a loss of £54 million. The clubs are wholly dependent on commodities, mainly on selling their matches to streaming companies like Netflix, Amazon Prime and DAZN, bypassing the less lucrative broadcasting contracts, and by transferring ‘players’, many of whom have been loaned out to smaller clubs to enhance their exchange value, or who hardly play a game while being paid about £80,000 a week. They are commodifiable property, rent-paying assets, securitisable. ‘We own super-star XX, and so you can lend us or sell us something or invest in us or, above all, advertise through us.’     

Among the worst aspects is the trend to leveraged buyouts, as in the case of the infamous buyout of Manchester United in 2005 by the American Glazer family. The most recent case is Burnley FC, acquired by the US private equity firm, ALK Capital, which used the club as collateral to secure a loan to buy the club. As a result, Burnley FC is now mortgaged and has debts of over £60 million, teetering on the edge of bankruptcy. As an element in a wider strategy to dismantle rentier capitalism this leveraging should be banned.

Burnley was formed in May 1882, as a bunch of amateurs from around the Lancashire mill town community. Like Liverpool FC, founded in 1892, it was a social commons, nurtured by townspeople over the years. They should be restored as that. A first step would be for the government to insist that all clubs should have at least 10% of the board members elected by the fans, as in Spain. Perhaps too they should consider moving towards the German system, in which 51% of a club must be owned by fans. Moving in that direction would take time and would have to be done in steps.

Another anti-rentier measure would be to declare that any corporate debt incurred in commercial transactions should not be liable for tax relief. Above all, all registered football clubs should be partially nationalised, through having a public share held by the local authority. If the Government means to give credence to its claims that Brexit was about restoring national sovereignty, it should show how it is going to give meaning to that with respect to what is often called the national game. If not, Labour should promise to do so.

There is a lovely anecdote about the formative years of Liverpool, Burnley, Manchester United and other founders of the football league. When a club was short of a player or two, they would go to a nearby mine and shout down for whoever was the best player to come up, only to be answered by a chorus, ‘For which position?’ We cannot go back to those days, but we should remember the roots and support reforms that move in the direction of reviving clubs as social commons.          

Guy Standing is a councillor of the Progressive Economy Forum, and a Professorial Research Associate of SOAS University of London.      

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Edited by PEF Chair Patrick Allen and council members Suzanne Konzelmann and Jan Toporowski

Publication Date 29th April 2021. Agenda Publishing

40 years of neoliberalism has failed to provide prosperity or stability to the UK economy. Instead it has led to low growth, turbulence, grotesque inequality , poverty and ill health for millions . This is the outcome of damaging economic polices driven by free market dogma, rentier capitalism and ideology. It’s time for a change.

This book contains 18 essays by PEF council members and academics who outline the essential features of a progressive economy dealing with the five massive challenges of our times to the economy – Covid-19, austerity, Brexit , inequality and climate change.

PEF calls for bold public intervention. Shrinking the state and weakening our public institutions has undermined social and community resilience and promoted an out-of-control, value-sapping and high-inequality model of capitalism. 

The authors say the resources of the state must build a fairer and more dynamic post-Covid society, using a mix of regional and industrial policy and investment to revolutionise our public health, housing and social services. A progressive new society should construct a new income floor and new measures to spread wealth and give everyone an equal stake in the economy. 

The financial crash of 2008 proved that only the state can rescue the economy when all else fails including the biggest banks. Covid has shown how only the state can rescue us from death and the collapse of the economy during a devastating pandemic. Only the state can steer the economy and deliver the investment needed to cope with climate change

The 2008 crash showed the breathtaking incompetence of the private financial sector. Now Covid has once again laid bare the myth than private is best – outsourcing to companies the job of track and trace at a cost of £37bn has so far failed to show any discernible benefit say the Public Accounts Committee.

By contrast, the selfless work of millions of NHS workers and volunteers has delivered one of the most outstanding vaccination programmes which has been the envy of the world. This has been done at modest cost and was only possible with a national health service drawing on the vocational drive of its workers for the common good.

The Biden adminstration is today showing the mighty power of the US State with Biden’s Covid and infrastructure bills. The results are expected to cut child poverty in half. The UK government should follow this lead and bring in new models of public intervention to deliver a pandemic-resistant, green economy which works for all citizens.

For an outline , list of chapters and authors and to order a copy go to this webpage

You can obtain a 25% discount on the cover price by entering code AGENDA25 on the Agenda page here

Launch event on Zoom – Wednesday 19th May 2021 at 11am . Joining details to follow.

The launch will be chaired Miatta Fahnbulleh , CEO of NEF and attended by Ed Miliband, Shadow Secretary of State for Business, Energy and Industrial Strategy . Martin Sandbu of the FT will attend as commentator.

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In his spending review this week, the Chancellor made clear the scale of the economic crisis facing the UK. Much discussion has followed as to the sustainability of the current spending commitments and public sector debt. Announcements of public sector pay freezes and cuts to foreign aid have been met with dismay.  

Might there be a better way of dealing with the longer-term economic costs of the pandemic? In a new report for the UCL Institute for Innovation and Public Purpose, we argue that the government should consider taking equity stakes in firms at risk of collapse to boost a sustainable recovery. Not only would this be preferential to piling up more publicly guaranteed debt on already highly indebted firms, but, once the economic situation has improved, it could generate a fiscal return.

The advantage of equity investment is that the state and taxpayers can recovery their money when an ailing firm gets back on its feet and is either sold off; or, in other cases, the state can make a longer-term investment, hopefully attracting in other forms of finance to support firms that private investors are not yet prepared to invest in. This avoids the socialisation of losses and privatisation of risk problem that has often occurred during financial and economic crisis.

Widespread government equity ownership in hundreds of thousands of small firms is neither desirable nor practically possible. But well-targeted state investments could help pull economies out of the recession and support longer term policy objectives at the same time. 

However, how to govern public assets to generate value has received little attention compared to the vociferous debate over whether or not to nationalise or privatise. If poorly managed, public equity bailouts risk damaging growth prospects.

Reviewing the evidence on state-owned enterprises across many countries, we find that they can be run effectively providing that the government ownership is institutionalized according to the highest standards of corporate governance and structured as ‘public wealth funds’ (PWFs) that combine arms-length independence from day-to-day politics with active and competent public governance.

The report argues for the creation of five different specialised PWFs: a National Wealth Fund in charge of mature assets such as airlines or energy companies; ‘mission-driven’ venture capital funds focused on innovation, climate transition and regional growth; and regional Urban Wealth Funds to support housing and urban renewal.

Successful examples of PWFs include Singapore which used these vehicles to help turn themselves from an economic backwater to one of the world’s richest countries in the space of a few decades from the 1970s onwards anda number of cities, such as Copenhagen’s City & Port Company and Hamburg’s HafenCity.

The costs of financing PWFs would be low. Even assuming that the suggested equity investments lose their value, the direct fiscal cost of investing in the above-mentioned funds would be small, only around 0.1 percentage points of GDP per year. Moreover, over time some of these investments would likely turn a profit. Historically, the yield on equity has been around 6 percent.

Managing public assets more professionally would also incentivise a wider rethink of public sector accounting, which is currently too focused on debt and short-term cash measures, and largely neglects public sector assets. A better approach for public sector accounting would be to focus on net worth (assets less liabilities) as the most comprehensive fiscal measure using accrual-based accounting. This takes into account both sides of the balance sheet and, when linked to the budget, would incentivise public sector investments.

As the IMF argued in report published last year, if the entire portfolio of public assets were properly accounted for and professionally managed, they could potentially generate some 3% of GDP in additional revenues to government budgets.

The holy grail of public asset management is an institutional arrangement that both removes governance from a government´s direct responsibilities, but at the same time encourages active commercial governance of public assets with the aim of generating value for the public and a dividend that can benefit society as a whole.

This blog was first posted on the IIPP web site

picture credit: www.learningVideo.com

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We write to support the proposal from the Labour party for a public programme to provide rapid internet service to the entire population (Broadband ‘communism’? They said that about the NHS, Journal, 19 November). This project would have a high social and economic rate of return, especially at current borrowing rates.

Since it would be socially profitable, the objection that the proposal is an election “giveaway” should not be taken seriously – that is not an objection raised for other infrastructure projects such as airports and motorways.

Arguments from self-interested corporations that a public sector programme would discourage private sector investment should be seen as unfounded special pleading. This pleading also ignores the fact that this network would create many more opportunities for web content providers to profit in a space where something approaching a real market operates, and is, therefore, decidedly selective in its view. Finally, to claim that this is an activity more appropriate for the private sector is a political assertion that fails to take account of the manifest failure of private companies to provide a broadband network accessible to all.

Patrick Allen Chair, Progressive Economy Forum, John Weeks Emeritus professor of Development Economics, Soas, Ha-Joon Chang University reader in the political economy of development, Cambridge University, Danny Dorling Halford Mackinder professor of geography, Oxford University, Susan Himmelweit Emeritus professor of economics, Open University, Will Hutton Principal of Hertford College, Oxford University, Johnna Montgomerie Reader in international political economy, King’s College London, Richard Murphy Professor of political economy, City, University of London, Guy Standing Professorial research associate, Soas, Sue Konzelmann Reader in management, Birkbeck, University of London, Stephany Griffith-Jones Financial markets director at the Initiative for Policy Dialogue, Columbia University, Daniela Gabor Professor of economics and macrofinance, University of the West of England, Natalya Naqvi Assistant professor in international political economy, LSE

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Rethinking Britain is not only for the many – it’s also written by the many. As a result, it doesn’t set out the vision of one or two people, but instead offers the assessment of a wide range of experts, who are working in or studying the areas we cover. We not only set out the problems and suggest policy solutions to address them. Our aim is to help improve life for people living in today’s Britain. Between each set of policy ideas, you’ll also find interludes.  These draw upon real-life stories of people in Britain who are experiencing unresolved difficulties that should be considered unacceptable in any developed economy or civilised society – and we suggest how these problems could be solved, too.

Although some depressing situations are described, our overall approach is extremely positive. Instead of denying that there are problems – or ignoring them, as many politicians have done – we take a much more “can do” approach to building the society that most of us would want to live in. That leads to another significant point: Whilst Attlee’s 1945 government put people and society at the centre of its policy ideas, less than forty years later, Thatcher’s administration reversed this, focusing on the individual, privatization and the wealthy. This raises the question: “In whose interests should the economy be run”?

The shift to individualism, private profit maximization and an obsession with “free” markets resulted in serious wealth for the few – and runaway inequality and poverty for the many. It’s therefore not hard to guess where those contributing to Rethinking Britain are coming from!  We strongly believe that a society that produces healthy, well educated, strongly motivated people – who have, or can realistically hope for, a good standard of living – will also help to generate a powerful and dynamic economy.

The post-1979 dogma – that the British government should play as small a part in the economy as possible – is also misguided. Far too much capital is being used for short-term, speculative purposes, whilst not enough is finding its way into the development of sustainable businesses that provide long term employment and pay decent wages – not the hand to mouth existence of a zero hours contract. In other words, the economy should work for the many, not just the few.

Another theme that runs through Rethinking Britain is the concept of citizenship – where sets of rights and obligations mean that you are indeed part of something bigger than yourself. This is the polar opposite of Thatcher’s point of view, that there is “no such thing as society”. Many of her policy ideas were developed in the context of the Cold War – which came to an end thirty years ago; and it’s time for her policy ideas to do the same.

By investing in Britain’s people, we can build a stronger, more cohesive society – which will underpin a more vibrant economy. Rethinking Britain shows how.

Photo credit: Flickr/Christian Reimer.

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The co-ownership sector, while significant, is not large – its annual turnover is estimated at £40 billion as of 2017. The John Lewis model is the one that everyone has heard of, but it is not typical for the sector, having 83,000 partners and a turnover of over £10bn. However, the sector is now growing following legislation which provides tax incentives for businesses to transform themselves into employee owned-businesses (EOBs) by setting up employee ownership trusts (EOTs).

This came about as a result of an initiative from the Coalition government, which commissioned research into employee owned businesses. The Nuttall report, published in 2012, found that firms where employees own a stake either individually or collectively through a trust are more resilient, display less sales variability, and deliver more stable performance over business cycles.

The profitability of EOBs correlates with giving employees greater autonomy in decision-making. EOBs that adapt their organisational structure and empower their front-end employees are more likely to sustain their performance as their size increases. It also provides evidence that EOBs create jobs faster than their non-EOB counterparts, particularly in times of economic downturn.

With such a positive endorsement from the research, the government decided to encourage more firms to convert to common ownership via the 2014 Finance Act. There are now tax advantages to provide the incentive to create employee-owned businesses, provided that these comply with certain strict requirements.

The main condition to be satisfied is that ownership of the company must be transferred to a trust with an all-employee benefit requirement, so that the trust property or profits are applied exclusively for the benefit of all eligible employees.

The tax incentives come from Schedule 37 of the Act, which allows the owner of a company to sell their shares to an EOT tax-free, as long as a simple majority of the shares are owned by the new trust. The trust can either borrow to fund the acquisition at the agreed valuation or the selling owners can agree that the price is paid gradually out of profits owned in the future by the trust. The other tax incentive is that trusts can pay staff tax-free bonuses of up to £3,600 per head.

Selling to a trust is particularly useful for long established businesses which remain in the control of founders. Such businesses often face significant succession problems. The founders are likely to want to preserve the business rather than close it down, sell or merge with another business, as this might lead to the firm being dismembered or changing out of all recognition.

The transfer of ownership to an employee-owned trust is an excellent way of preserving the business, its name, its ethos and its direction of travel

My firm, Hodge Jones & Allen (HJA), decided to go down this route this year after 41 years as a partnership. We spent 9 months preparing for the transfer, which finally completed on 10 December 2018. Remarkably, we are the first law firm to transfer its business to a trust 100% owned by its staff.

With all profits being generated for the benefit of employees, the firm should be in a position to pay better bonuses and salaries than its competitors, and this in turn should make it able to attract and retain the best quality staff in its sector.

There are challenges to the conversion. There is lot of paperwork. Banks are new to this game and need to understand how the business will operate in the future. The research did find that EOBs find it harder to access funding than non-EOBs. This is unfortunate, as EOBs apparently grow at a faster rate, but they do need to access bank funding to help this growth.

The bottom line is that the trust can only fulfil its object of benefiting the staff if it is profitable. This should drive the business to good management, steady investment and greater efficiency, and this will be reassuring to funders. Finally, EOBs should be less vulnerable to predators as few EOBs will want to sell up and thereby deprive their staff of a good and stable job.

As more EOTs are formed and flourish we are likely to see a substantial increase in the numbers of firms converting to co-ownership.

Photo credit: Flickr/Stefan Worm.

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