The loneliness of the long-distance runner

I have been, almost literally, struck dumb these last few weeks of 2011 as I have contemplated the intellectual and ethical poverty of our ruling clasess. One financial blog’s reflections on the year and what the future holds caught my mood perfectly

1. Wall Street dropped some of its pretence to fairness and softer forms of fraud and resorted to overt theft as MF Global stole significant sums of money, bonds, and bullion assets directly from customer accounts, under the eyes of the regulators, and transferred the money to its global bankers who refused to give it back.
Trend: Theft by the financiers will continue and intensify. The victims will be vilified to blunt public reaction.

2. The Eurozone came under unremitting assault by the ratings agencies and their associated banks and hedge funds. The Euro is an inherently 'difficult' currency to manage and has always been more susceptible to broad swings in value. This is because it is an economic union without a comprehensive political and financial union. It more closely resembles the original thirteen states of the US under the Articles of Confederation than it does a comprehensive Republic.
Trend: The Eurozone will continue to struggle to find a balance between political and financial factors, and will evolve into a stronger union of fewer members. Germany and France will continue to emerge as the great Western European power. The UK will be preoccupied by its own set of severe internal problems and regional unrest as austerity bites deeply. The UK will begin to act as more of an Anglo-American agent in the Eurozone. It may take on more of the character of an Orwellian state.

Some people might (and do very persuasively) argue that it is time for a new hegemony. It would be nice, certainly, for more respect to be shown to Scandinavian values. Even the heavy-handed Catholic church has managed to sustain its critical attitude to greed and, over the decades, seems to have pursued a much more positive attitude to community enterprise. The success of the Mondragon model of cooperative industrial activity is one which deserves much wider celebration – although it does worry me that I cannot find a proper treatment in the English language of the story of how this small venture by a catholic priest in the 1940s in a remote Spanish village led to such a commercial success (giving now employment to 30,000 and weathering, so far, all economic storms). There are, however, vidoes on its inspiring story here; here; here; and here. Think Ronnie Lessem’s Managing in four worlds. However strong my affections are for such models, my own feeling is that the better approach is that of the sceptic, agnostic or, indeed, anarchist – ie a “plague on all your houses”.

This is a time of year for thinking about one's life and making resolutions. A few years ago, I discovered a list of 40 tips for living a more balanced life. I've reduced it to 30 tips

A friend has noticed some of the references I've made in this blog to the benefits of rural life for us over-connected zombies - and sent me a recent Pico Iyer article on the joys of solitude

We have more and more ways to communicate but less and less to say. Partly because we’re so busy communicating. And so rushing to meet so many deadlines that we hardly register that what we need most are lifelines.

And a blogpost from an ex-banker has made the same point.

I've been trying to read over my blogposts of the past year (all 250 plus of them) - and feel that I have been too much of the gadfly. Skating lightly over profound issues. My feeling is that I should return in the posts to come to the issues they raise - read more closely the large number of links I've given - and offer rather deepr thoughts........

There is another way

I am grateful to a Balkans historian, an Irish economist and an anonymous Canadian for this post. Tom Gallagher pointed me to a post on the website of David McWilliams one of whose discussants gave the following info -

Recently, the workers in the Fagor Appliance Factory in Mondragón, Spain, received an 8% cut in pay. This is not unusual in such hard economic times. What is unusual is that the workers voted themselves this pay cut. They could do this because the workers are also the owners of the firm. Fagor is part of the Mondragón Cooperative Corporation, a collection of cooperatives in Spain founded over 50 years ago.

The story of this remarkable company begins with a rather remarkable man, Fr. José Maria Arizmendiarrieta, who was assigned in 1941 to the village of Mondragón in the Basque region of Spain. The Basque region had been devastated by the Spanish Civil War (1936-1938); they had supported the losing side and had been singled out by Franco for reprisals. Large numbers of Basque were executed or imprisoned, and poverty and unemployment remained endemic until the 1950’s. In Fr. José’s words, “We lost the Civil War, and we became an occupied region.” However, the independent spirit of the Basques proved to be fertile ground for the ideas of Fr. José. He took on the project of alleviating the poverty of the region. For him, the solution lay in the pages of Rerum Novarum, Quadragesimo Anno, and the thinkers who had pondered the principles these encyclicals contained. Property, and its proper use, was central to his thought, as it was to Pope Leo and to Belloc and Chesterton. 
“Property,” Fr. José wrote, “is valued in so far as it serves as an efficient resource for building responsibility and efficiency in any vision of community life in a decentralized form.” José’s first step was the education of the people into the Distributist ideal. He became the counselor for the Church’s lay social and cultural arm, known as “Catholic Action,” and formed the Hezibide Elkartea, The League for Education and Culture, which established a training school for apprentices. He helped a group of these students become engineers, and later encouraged them to form a company of their own on cooperative lines. In 1955, when a nearby stove factory went bankrupt, the students raised $360,000 from the community to buy it. This first of the co-operatives was named Ulgor, which was an acronym from the names of the founders.

From such humble beginnings, the cooperative movement has grown to an organization that employs over 100,000 people in Spain, has extensive international holdings, has, as of 2007, €33 billion in assets (approximately US$43 billion), and revenues of €17 billion. 80% of their Spanish workers are also owners, and the Cooperative is working to extend the cooperative ideal to their foreign subsidiaries. 53% of the profits are placed in employee-owner accounts. The cooperatives engage in manufacturing of consumer and capital goods, construction, engineering, finance, and retailing. But aside from being a vast business and industrial enterprise, the corporation is also a social enterprise. It operates social insurance programs, training institutes, research centres, its own school system, and a university, and it does it all without government support.

Mondragón has a unique form of industrial organization. Each worker is a member of two organizations, the General Assembly and the Social Council. The first is the supreme governing body of the corporation, while the second functions in a manner analogous to a labor union. The General Assembly represents the workers as owners, while the Social Council represents the owners as workers. Voting in the General Assembly is on the basis of “one worker, one vote,” and since the corporation operates entirely form internal funds, there are no outside shareholders to outvote the workers in their own cooperatives. Moreover, it is impossible for the managers to form a separate class which lords it over both shareholders and workers and appropriates to itself the rewards that belong to both; the salaries of the highest-paid employee is limited to 8 times that of the lowest paid.

Mondragón has a 50 year history of growth that no capitalist organization can match. They have survived and grown in good times and bad. Their success proves that the capitalist model of production, which involves a separation between capital and labor, is not the only model and certainly not the most successful model. The great irony is that Mondragón exemplifies the libertarian ideal in a way that no libertarian system ever does. While the Austrian libertarians can never point to a working model of their system, the Distributists can point to a system that embodies all the objectives of a libertarian economy, but only by abandoning the radical individualism of the Austrians in favor of the principles of solidarity and subsidiarity.

The Cooperative Economy of Emilia-Romagna. Another large-scale example of Distributism in action occurs in the Emilia-Romagna, the area around Bologna, which is one of 20 administrative districts in Italy. This region has a 100 year history of cooperativism, but the coops were suppressed in the 1930′s by the Fascists. After the war, with the region in ruins, the cooperative spirit was revived and has grown ever since, until now there are about 8,000 coops in the region of every conceivable size and variety. The majority are small and medium size enterprises, and they work in every area of the economy: manufacturing, agriculture, finance, retailing, and social services.
The “Emilian Model” is quite different from that used in Mondragón. While the MCC uses a hierarchical model that resembles a multi-divisional corporation (presuming the divisions of a corporation were free to leave at any time) the Emilian model is one of networking among a large variety of independent firms. These networks are quite flexible, and may change from job to job, combining a high degree of integration for specific orders with a high degree of independence. The cooperation among the firms is institutionalized many in two organizations, ERVET (The Emilia-Romagna Development Agency) and the CNA (The National Confederation of Artisans).

ERVET provides a series of “real” service centers (as opposed to the “government” service centers) to businesses which provide business plan analysis, marketing, technology transfer, and other services. The centers are organized around various industries; CITER, for example, serves the fashion and textile industries, QUASCO serves construction, CEMOTOR serves earth-moving equipment, etc. CNA serves the small artigiani, the artisanal firms with fewer than 18 employees, and where the owner works within the firm, and adds financing, payroll, and similar services to the mix.

The Emilian Model is based on the concept of reciprocity. Reciprocity revolves around the notion of bi-directional transfers; it is not so much a defined exchange relationship with a set price as it is an expectation that what one gets will be proportional to what one gives. The element of trust is very important, which lowers the transaction costs of contracts, lawyers, and the like, unlike modern corporations, where such expenses are a high proportion of the cost of doing business. But more than that, since reciprocity is the principle that normally obtains in healthy families and communities, the economic system reinforces both the family and civil society, rather than works against them.
Space does not permit me to explore the richness of the Emilian Model. I will simply note here some of its economic results. The cooperatives supply 35% of the GDP of the region, and wages are 50% higher than in the rest of Italy. The region’s productivity and standard of living are among the highest in Europe. The entrepreneurial spirit is high, with over 8% of the workforce either self-employed or owning their own business. There are 90,000 manufacturing enterprises in the region, certainly one of the densest concentrations per capita in the world. Some have called the Emilian Model “molecular capitalism”; but whatever you call it, it is certainly competitive, if not outright superior, to corporate capitalism.

Other Examples. There are many other functioning examples of Distributism in action: micro-banking, Employee stock option plans, mutual banks and insurance companies, buyers and producers cooperatives of every sort. This sample should be enough how distributism works in practice. Distributists are often accused of being “back to the land” romantics. The truth is otherwise. There are no functioning examples of a capitalism which operates anywhere near its own principles; there couldn’t be, because the mortality rates are simply too high. Hence, capitalism always relies on government power and money to rescue it from its own excesses. Distributism goes from success to success; capitalism goes from bailout to bailout

I visited Mondragon in the late 1980s in my capacity as Chairman of a trust which funded community enterprise in the West of Scotland and was deeply impressed - not least by the area's remoteness as I ascended a steep mountain in a hired car to reach the place. We need more celebratation of its achievements.

And the "way" which is shown in the picture is the new road which the village has built at the bottom of my garden. Not as fearsome as I had feared!!  

limits of expertise

A scrappy blog today – I was still trying to make sense of William Davies’s intriguing paper from which I quoted yesterday which has, as its title, The Limits of Expertise. I have never tried to explain (even to myself) why I chose the Saul quotation for my masthead on the right - We've spent half a century arguing over management methods. If there are solutions to our confusions over government, they lie in democratic not management processes. It is a reflection, I suppose, of the ambivalence within me about political and managerial roles. For the first 20 years of my adult life. I was a (technocratic) politician; for the last 20 years I have been an apolitical adviser
But in 1974 or so – based on my experience of working with community groups and trying to reform a small municipal bureaucracy – I wrote a pamphlet called From Corporate Management to Community action which reflected my disillusionment with the technocratic fashions of the time.
New Labour was a social engineering government with a vengeance – with Brown given the time and opportunity to invent a giant machine for minute tweaking of socio-economic processes acroess the board. His budgets (companies), tax credits (households) and PSA (public service agreements setting targets for Departments) were infamous for their detail and optimistic assumptions about the link between technical means and social outcomes. It was not just the sheer arrogance – it was downright ignorance of the literature on the perversity of social interventions – which amazes.
Davies’s The Limits of Expertise tries to look at the philosophical underpinnings of what we might call the "policy bent" – by which I mean the incredible growth in the past 20 years of Think Tanks and of interest in policy analysis. That reflects, of course, the huge expansion in universities of social science, paramount amongst which has been economics – with its weird but (until recently) unquestioned assumptions about human nature. He has an interesting argument -

Unforeseen by the policy architects who designed the New Labour platform, the defining problem of the past decade has turned out to be an ethical-political one: antisocial behaviour. Utilitarian calculations can only conceive of the world in economic terms (‘economic’ in the sense of weighing up profit and loss), and as such are entirely ill-equipped to deal with this problem. It can be bracketed as an aspect of poverty or even biology; it can be tackled through an extension of police and surveillance technologies; or it can be swept under the carpet through mystical references to ‘communities’ and the voluntary sector. All the while, it looks set to rise in the future, thwarting all our expert analyses of the psychology and economics that supposedly determine it.
For the foreseeable future, our politicians will treat it like crime or unemployment: quantitative phenomena that rise and fall as outcomes of policy and/or the economic weather. In time, however, it may have to be treated as an ethical and political issue. At an ethical level, Richard Reeves points out that there is a growing need to revive respect for 'character’. He point to three dimensions of this: a sense of personal agency or self-direction; an acceptance of personal responsibility; and effective regulation of one’s own emotions, in particular the ability to resist temptation or at least defer gratification.

That reminded me of David Cameron’s address in November which articulated his Big Society idea.
It reads very well – it is quite something for a Conservative Prime Minister to be committed to deal with poverty and inequality. He actually quotes from the recent Wilkinson and Picket book which strongly argues that healthy societies are equal ones.
Having proven (to at least his own satisfaction) that big government (spending) has not dealt with the problem of poverty, Cameron then suggests that the main reason for this is the neglect of the moral dimension, refers to various community enterprises, entrepreneurs and goes on -

Our alternative to big government is not no government - some reheated version of ideological laissez-faire. Nor is it just smarter government. Because we believe that a strong society will solve our problems more effectively than big government has or ever will, we want the state to act as an instrument for helping to create a strong society. Our alternative to big government is the big society.
But we understand that the big society is not just going to spring to life on its own: we need strong and concerted government action to make it happen. We need to use the state to remake society.
The first step is to redistribute power and control from the central state and its agencies to individuals and local communities. That way, we can create the opportunity for people to take responsibility. This is absolutely in line with the spirit of the age - the post-bureaucratic age. In commerce, the Professor of Technological Innovation at MIT, Eric von Hippel, has shown how individuals and small companies, flexible and able to take advantage of technologies and information once only available to major multinational corporations, are responding with the innovations that best suit the needs of consumers.
This year's Nobel Prize winner in Economics, Elinor Ostrom, has shown through her life's work how non- state collective action is more effective than centralised state solutions in solving community problems.
Our plans for decentralisation are based on a simple human insight: if you give people more responsibility, they behave more responsibly.
So we will take power from the central state and give it to individuals where possible - as with our school reforms that will put power directly in the hands of parents.
Where it doesn't make sense to give power directly to individuals, for example where there is a function that is collective in nature, then we will transfer power to neighbourhoods. So our new Local Housing Trusts will enable communities to come together, agree on the number and type of homes they want, and provide themselves with permission to expand and lead that development.
Where neighbourhood empowerment is not practical we will redistribute power to the lowest possible tier of government, and the removal of bureaucratic controls on councils will enable them to offer local people whatever services they want, in whatever way they want, with new mayors in our big cities acting as a focus for civic pride and responsibility.
This decentralisation of power from the central to the local will not just increase responsibility, it will lead to innovation, as people have the freedom to try new approaches to solving social problems, and the freedom to copy what works elsewhere.

It is sad that I never found Blair or Brown singing a song like this. Of course one can make various criticisms – one of the best is in a TUC blog
But the fact remains that community enterprise (pity he didn’t mention cooperatives! is worth supporting. I was very heartened to read in another blog about the continuing success of the Mondragon Cooperative in Spain which has increased its enployment in the last 20 years from 20,000 to 90,000.
I remember visiting Mondragon in 1990 in an endeavour to bring its lessons back to Scotland.