Our Gaddarene swine

This blog generally tries to steer away from crises since there are so many others in the blogosphere who have more insights than me on these – be they economic, financial or political. I try to be a distinctive voice on the things I know best – organisational change in transition countries - and otherwise try to pass on what seem to be sensible comments on ongoing events. The financial crisis, however, which has been rumbling on since late 2007 has, I feel, few real experts – in the sense of both contextual understanding and insights into what interventions would actually help put Humpty Dumpty together again. There are a lot of people, of course, who have the skills, understanding and contacts to exploit this situation for their own benefit but few (like George Soros and Nicolas Talib) able and willing to offer solutions in the interests of ordinary citizens.
Today, however, Paul de Grauwe has a useful comment on Social Europe/ which I would like to share in its entirety -

Imagine an army going to war. It has overwhelming firepower. The generals, however, announce that they actually hate the whole thing and that they will limit the shooting as much as possible. Some of the generals are so upset by the prospect of going to war that they resign from the army. The remaining generals then tell the enemy that the shooting will only be temporary, and that the army will go home as soon as possible. What is the likely outcome of this war? You guessed it. Utter defeat by the enemy.
The European Central Bank (ECB) has been behaving like the generals. When it announced its programme of government bond buying it made it known to the financial markets (the enemy) that it thoroughly dislikes it and that it will discontinue it as soon as possible. Some members of the Governing Council of the ECB resigned in disgust at the prospect of having to buy bad bonds. Like the army, the ECB has overwhelming (in fact unlimited) firepower but it made it clear that it is not prepared to use the full strength of its money-creating capacity. What is the likely outcome of such a programme? You guessed it. Defeat by the financial markets.
Financial markets knew that the ECB was not fully committed and that it would stop the programme. As a result, they knew that the stabilisation of the price of government bonds would only be temporary and that after the programme is discontinued prices would probably go down again. Few investors wanted to keep these bonds in their portfolios. As a result, government bonds continued to be sold, and the ECB was forced to buy a lot of them.
There is no sillier way to implement a bond purchase programme than the ECB way. By making it clear from the beginning that it does not trust its own programme, the ECB guaranteed its failure. By signalling that it distrusted the bonds it was buying, it also signalled to investors that they should distrust these too.
Surely once the ECB decided to buy government bonds, there was a better way to run the programme. The ECB should have announced that it was fully committed to using all its firepower to buy government bonds and that it would not allow the bond prices to drop below a given level. In doing so, it would create confidence. Investors know that the ECB has superior firepower, and when they get convinced that the ECB will not hesitate to use it, they will be holding on to their bonds. The beauty of this result is that the ECB won’t have to buy many bonds.
Why has the ECB not been willing to use this obvious and cheaper strategy?
Part of the answer has to do with the objections that have been raised against the idea that the central bank should be a lender of last resort in the government bond markets of a monetary union. Some are serious (moral hazard); others are phony (inflation risk). I discussed these in De Grauwe (2011) (see also Wyplosz 2011). My impression, however, is that these objections hide another more fundamental reason. The people sitting around the table in Frankfurt continue to believe that financial stability is not part of their core business, and, to use the words of Trichet, that there is only one needle on the Frankfurt compass and that is inflation. As long as this view prevails the ECB will be reluctant to do the obvious.
The result of this failure of the ECB to be a lender of last resort has been that a surrogate institution, the EFSF/ESM, had to be created that everybody knows will be ineffective. It has insufficient firepower and has an unworkable governance structure where each country keeps its veto power. In times of crisis it will be paralysed. As markets know this, its credibility will be weak.
To hide these shortcomings European leaders are now creating the fiction that by some clever leveraging trick the resources of the EFSF/ESM can be multiplied, allowing the ECB to retire to its Panglossian garden of inflation targeting. European leaders should know, however, that leverage creates risk, very large risks. These appear with full force when liquidity crises erupt. Thus when the leverage trick will be most needed, it will fail as it will show how risky the positions are of those who have guaranteed the leverage construction. Governments which now enjoy AAA creditworthiness will take the full blow of a 100% loss on their equity tranches and will lose their creditworthiness in one blow. The whole risky construction will collapse like other clever financial constructions of the recent past.
Academics have the reputation of living in an ivory tower far away from the realities of the world. My impression is that instead of the academics, it is the European leaders who have been living in an ivory tower. Disconnected from the economic and financial realities, they have created an institution that does not work and will never do so properly. Now they are creating a financial gimmick that, in their fantasies, they expect to solve the funding problems of major Eurozone countries. It is time for the European leaders to step back into the real world.

Craig Murray also has a brief and very succinct comment on the issue as does Der Spiegel in its article Politics stupid And I recommend the daily press summaries from Open Europe as the best there are at the moment on this issue.

Is training a waste of money? Part One

Christmas may still be 2 months away but one reputable blog has come with the sort of quiz we play at that time of the year - asking people “which book provides support, or is a book to which one often returns. And the answer cannot be the Bible”. As the participants in the subsequent discussion thread recognise, it’s not an easy question to answer. Most of our reading is novels and specialist stuff. There are, of course, classic novels (both old and new) to which we can and do return but several of the discussants say that it is poetry to which they go back – I would tend to agree. I often turn to TS Eliot, Bert Brecht, WS Graham and Norman MacCaig (sadly BBc doesn't allow me access this last), for example. What about my readers?

My subject today is training of public officials in ex-communist countries.
The European Union has spent many hundreds – if not thousands - of millions of euros on training of public servants in the accession states; in Eastern Europe and central Asia (and continues to do so in the Operational Programmes of its Structural Funds with which I am currently involved here in Bulgaria). Despite the European Commission emphasis on evaluation, I am not aware of any critical evaluation it has commissioned of that spending – nor of any guidelines it has issued to try to encourage good practice in this field of training public officials (It has issued, in recent years, guidelines on “good governance”, internal project monitoring, project cycle management, institutional assessment and capacity development, ex-ante evaluation). And, in particular, there is nothing available for those in transition countries who want to go beyond the task of managing one specific programme of training and actually build a system of training which has the key features of –
• Continuity
• Commitment to learning and improvement

A transition country is lucky if its officials and state bodies actually benefit from a training programme – with training needs being properly assessed; relevant and inspiring courses constructed; and delivered (by skilled trainers) in workshops which engage its participants and encourage them to do things differently in their workplace. Too often, many of these ingredients are missing. But, even if they are present, the programme is usually an ad-hoc one which fails to assist the wider system. The trainers disappear – often to the private sector; their training materials with them. No improvement takes place in the wider system of training public officials.

For 20 years now I have led public administration reform projects in a variety of “transition” countries in central Europe and central Asia – in which training and training the trainer activities have always been important elements. Initially I did what most western consultants tend to do – shared our “good practice” from western europe. But slowly – and mainly because I was no longer living in western Europe – I began to see how little impact all of this work was having. I summarised my assessment recently in the following way-
• Most workshops are held without sufficient preparation or follow-up. Workshops without these features are not worth holding.
• Training is too ad-hoc – and not properly related to the performance of the individual (through the development of core competences) or of the organisation
• Training, indeed, is often a cop-out – reflecting a failure to think properly about organisational failings and needs. Training should never stand alone – but always be part of a coherent package of development – whether individual or organisational.
• It is critical that any training intervention is based on “learning outcomes” developed in a proper dialogue between the 4 separate groups involved in any training system – the organisational leader, the training supplier, the trainer and the trainee. Too often it is the training supplier who sets the agenda.
• Too many programmes operate on the supply side – by running training of trainer courses, developing manuals and running courses. Standards will rise and training make a contribution to administrative capacity only if there is a stronger demand for more relevant training which makes a measurable impact on individual and organisational performance.
• In the first instance, this will require Human Resource Directors to be more demanding of training managers – to insist on better designed courses and materials; on proper evaluation of courses and trainers; and on the use of better trainers. More realistic guidelines and manuals need to be available for them
• Workshops should not really be used if the purpose is simply knowledge transfer. The very term “workshop” indicates that exercises should be used to ensure that the participant is challenged in his/her thinking. This helps deepen self-awareness and is generally the approach used to develop managerial skills and to create champions of change.
• Workshops have costs – both direct (trainers and materials) and indirect (staff time). There are a range of other learning tools available to help staff understand new legal obligations.
• HR Directors need to help ensure that senior management of state bodies looks properly at the impact of new legislation on systems, procedures, tasks and skills. Too many people seem to think that better implementation and compliance will be achieved simply by telling local officials what that new legislation says.
• A subject specialist is not a trainer. Too few of the people who deliver courses actually think about what the people in front of them actually already know.
• The training materials, standards and systems developed by previous projects are hard to find. Those trained as trainers – and companies bidding for projects – treat them, understandably as precious assets in the competitive environment in which they operate and are not keen to share them!

And this last point perhaps identifies one of the reasons why transition countries have found it so difficult to establish public training systems to match those in the older member states. From the beginning they were encouraged to base their systems on the competitive principle which older member states were beginning to adopt. Note the verb - "were beginning". And, of course, there is no greater zealot than a recent convert. So experts who had themselves learned and worked in systems subsidised by the state appeared in the east to preach the new magic of competition. And states with little money for even basic services were only too pleased to buy into that principle. The result is a black hole into which EU money has disappeared.
I will, in the next post, try to set out some principles for capacity development of public training systems in transition countries.
The photograph is of me at the communal table of Rozinski Monastery here in Bulgaria - taken a couple of year ago by my friend and colleague Daryoush Farsimadan, I think there is something appropriate there....

Downside of Sofia Charms?

I’ve talked several times on the blog about the charm of central Sofia – with its parks and buskers with their retro music; narrow streets, small shops and atmosphere, the owners on the doorstep with a coffe and cigarette talking with friends. Of course the downside of such charm is that those who run the tiny vegetable, dressmakers, tricotage (thread) shops and various types of galleries barely make a living. How many of them are rented, I wonder, and therefore vulnerable to landlord rental hikes and commercial redevelopment? And I wonder how many of those who engage in this sort of soulless redevelopment realise what they are destroying. Is there nothing which can counter this Mammon? Do the city authorities realise what an asset they have? If so, are they doing anything about it? The lady mayor is certainly a huge improvement on her predecessor who, I was told yesterday, used to charge significant sums for those who wanted an audience with him to discuss their problems.

In the Yavorov District on Tuesday – a leafy and lively area near the University and just across from the great park which extends from the Eagle bridge and the football stadium for more than a kilometre east along the Express way which starts the run to the Thracian Valley, Plovdiv and Burgas. Looked at an elegant old flat which had housed the middle managers of the railways in the 30s in an area otherwise known as a residential one for the military at the beginning of the last century. And ventured into a small basement antique shop which was a real alladin’s cave of old Bulgarian and Russian stuff. The prize haul was a set of the small, shaped bottles in which rakia used to be drunk.

They seem to be 1950s or early 1960s – with wry humour stamped on to the glass. I haven’t discussed rakia yet in the blog (apart from the blog about the recent visit to Teteven). First time I tasted rakia in 2002, when I sped through the country on the way to the Turkish Aegean, I found it inspid. But I have now had a chance to taste various brands – and compare it with various Romanian palinka – and have become an afficiando. Here is a write up of one brand which won a few years back a silver medal in the International Review of Spirits Award -

Golden salmon colour. Vanilla and toasted nut aromas. nice oily texture. Dryish, vanilla bean oily nut flavors. Finishes with a lightly sweet powdered sugar and pepper fade. A nice texture and finish but could use more on the mid-palate

Finally – a great blogposts about traditional sheep farming by someone who spent a couple of months with the shepherds and cheese makers in the Carpathians.

The power of images

George Monbiot’s post in yesterday’s Guardian gave me some good links to papers trying to encourage a debate which is long overdue -

We think we know who the enemies are: banks, big business, lobbyists, the politicians who exist to appease them. But somehow the sector which stitches this system of hypercapitalism together gets overlooked. That seems strange when you consider how pervasive it is. It is everywhere, yet we see without seeing, without understanding the role that it plays in our lives. I am talking about the advertising industry. For obvious reasons, it is seldom confronted by either the newspapers or the broadcasters. The problem was laid out by Rory Sutherland when president of the Institute of Practitioners in Advertising. Marketing, he argued, is either ineffectual or it "raises enormous ethical questions every day". With admirable if disturbing candour he concluded that "I would rather be thought of as evil than useless." A new report by the Public Interest Research Centre and WWF opens up the discussion he appears to invite. Think of Me as Evil? asks the ethical questions that most of the media ignore – and adopts a rigorous approach, seeking out evidence. Our social identity is shaped, it argues, by values which psychologists label as either extrinsic or intrinsic. People with a strong set of intrinsic values place most weight on their relationships with family, friends and community. They have a sense of self-acceptance and a concern for other people and the environment. People with largely extrinsic values are driven by a desire for status, wealth and power over others. They tend to be image-conscious, to have a strong desire to conform to social norms and to possess less concern for other people or the planet. They are also more likely to suffer from anxiety and depression and to report low levels of satisfaction with their lives.
We are not born with our values: they are embedded and normalised by the messages we receive from our social environment. Most advertising appeals to and reinforces extrinsic values. It doesn't matter what the product is: by celebrating image, beauty, wealth, power and status, it helps create an environment that shifts our value system.

A pamphlet from the Compass Think Tank also picks up the issues. Less measured in its tone than the PIRC publication, it argues that advances in psychology. neurology and technology have given advertising insidious new powers; points to the interventions which governments have been making since the 1960s in relation to tobacco, protection of children etc and makes a series of recommendations – including the banning of advertising in public spaces, a measure introduced recently with great success apparently in the mega-city of Sao Paulo (20 million population).

Advertising may, as Monbiot suggests, have succeeded in the past few years in keeping its head down but there was a time when it was under attack. In my youth, I remember the impact of Vance Packard’s The Hidden Persuaders (1956 or so) and, a few years later, Jk Galbraith’s powerful dissection (in his 1967 book The New Industrial State) of the reality of the market and the way large companies shaped demand. Of course, the downfall of large companies a couple of decades later by the more flexible Apple and Microsoft companies was widely used to discredit Galbraith’s thesis. A more measured assessment of his arguments about corporate power (and indeed contribution to economics) appeared in the Australian Review which said -

Two rejoinders are in order. First, the qualitative evolution of economic systems highlights that grand generalisations are necessarily period-specific. The character of the automobile market after the mid-1970s may be instructive, but it does not vitiate generalisations on its character before the mid-1970s.
Second, Galbraith’s generalisations regarding the unbridled power of the corporate sector retain direct relevance to other segments of the corporate sector—the military-industrial ‘complex’ (including constructors), big oil (centred on Exxon Mobil), the medical-insurance complex, big chemical, big tobacco, big retail (Wal-Mart) and big finance. It is curious that Galbraith’s critics have not sought to juxtapose Galbraith’s focus with current developments that involve corporate actors writing the legislation that governs their sector (medical-insurance), heading off legislation or penalties that adversely effect their sector (oil, chemical, tobacco, etc.), or channeling foreign policy with heinous implications (weapons contractors and constructors).
On the related issue of consumers as pawns, it is true that American consumers belatedly exercised autonomy in electing to buy the automobiles of foreign manufacturers (albeit a sub-sector of the market remains subservient to the US auto giants’ emphasis on sports utility vehicles and the preposterous Hummer). Galbraith rightly asked the rationale for the then vast sums spent by producers on marketing (a question never satisfactorily addressed by mainstream economists)

Most people, however, want to see the world’s economies refloated and jobs returning. Whatever their gripes about advertising, they see it as a means of aiding that objective. Those who see the huge waste and social destruction of our present system have an upward struggle. I was pleased to see people like Fritjof Capra and and Hazel Henderson taking the argument into the enemy camp with a pamphlet published in 2009 by the Institute of Chartered Accountants of England and Wales – entitled Qualitative Growth. I wouldn’t say it is the most convincing paper for such an audience – and am sorry that its references didn’t give wider sources eg Douthwaite.
The problems of the economic system we have can be best be summed up in two words - dissatisfaction and waste. Advertising creates the first - and the economic machine wastes people, resources and the planet. And yet its ideologues have erected a propoganda machine which tells us that it is both efficient and effective! What incredible irony!

Last evening was spent very pleasantly at one of Astry Gallery’s great vernissajs, celebrating the opening of yet another exhibition. This time the work of Natasha Atanassova and Nikolay Tiholov. Natasha is on the left and Vihra, the gallery impressario, on the right. And the painting at the top of the post is one of two I bought - this one by Natasha. The second is by Nikolay and is here -

Astry Gallery (under Vihra's tutelage) is unique for me amongst the Sofia galleries in encouraging contemporary Bulgarian painting. Two things are unique - first the frequency of the special exhibitions; but mainly that Vihra follows her passion (not fashion). I am not an art professional - but Vihra has a real art of creating an atmosphere in which people like me can explore. I have been to a couple of other exhibition openings here and they were, sadly, full of what I call "pseuds" - people who talked loudly (mostly Embassy people) and had little interest in the paintings (except perhaps their investment value). Vihra and her Astry Gallery attract real people who share her pasion and curiousity. It is always a joy to pop in there - and talk to her, visitors, artists, other collectors and her father.

Is complexity theory useful?

Thirty years ago terms such as "policy failure” and "implementation drift” were all the rage in political science circles – with the implicit assumption that such drift was a bad thing ie that the original policy had been and/or remained relevant and effective. Nowadays we are more sceptical about the capacity of national (and EU) policy-making – and (therefore?) more open to systems thinking and complexity theory and its implications for public management. Certainly Gordon Brown’s fixation with targets was positively Stalinistic – and was progressively softened and finally abolished on his demise. I have blogged several times about the naivety of the belief that national governments (and, logically, companies) could control events by pulling levers – sometimes calling in aid posts from the thoughful blog Aid on the edge of chaos ; John Seddon and his systems approach and Jake Chapman who wrote a useful paper some time ago about the implications of systems thinking for government.
I have never, however found it easy to get my head around the subject. I am now reading the Institute of Government’s recent pamphlet on System Stewardship which is exploring the implications for english Civil Service skills of the Coalition government apparent hands-off approach to public services ie inviting a range of more localised organisations to take over their running – within some sort of strategic framework. The task of senior civil servants then becomes that of designing and learning from (rather than monitoring (?) the new system of procurements. My immediate thought is why so few people are talking about the reinvention of English local government (turned in the last 2 decades into little more than an arm of central government) – ie of inviting/requiring local authorities (rather than central government) to do the commissioning. The logic of complexity theory for collective organisations is presumably to reduce hierarchies and move decision-making as near as possible to individuals in their localities. Neoliberals say this means markets (dominated by large oligopolies); democrats say it means municipalities committed to delegation and/or mutual societies and social enterprises; and many northern Europeans would argue that they have the answer with their mixture of coalition governments, consultation and strong municipalities. But those who write in the English language don't pay much attention to that.
When I googled "stewardship”, I realised it has, in the last few years, become a new bit of jargon – and have to wonder if it is not a new smokescreen for neo-liberalism.
For the moment, I keep an open mind and will be reading three papers I have found as a result of this reading – a rather academic-looking Complexity theory and Public Administration – what’s new?; a rather opaque-looking Governance and complexity – emerging issues for governance theory; and a more useful-looking Governance, Complexity and Democratic participation – how citizens and public officials But I'm not holding my breath for great insights - just seems to be academic reinvention by new labels.

In Memoriam; Ion Olteanu 1953-2010

I dedicate this post to the memory of Ion Olteanu – a Romanian friend who died a year ago and whose anniversary was today at the Scoala Centrala in Bucharest. Sadly, being in Sofia, I wasn’t able to attend. He was one of a tiny minority in post-Ceausescu Romania with a vision for Romania – and worked tirelessly and with great sacrifice and professional passion with its adolescents to try to realise it. He had a marvellous and unique combination of tough logic and tender care.
I hope he will consider it a suitable memorial comment.

In recent years, some of us consultants in admin reform have found ourselves drafting manuals on policy-making for government units of transition countries. I did it ten years ago for the Slovak Civil Service (it is one of the few papers I haven't yet posted on the website). I’m sorry to say that what is served up is generally pure fiction – suggesting a rationality in EC members which is actually non-existent. I like to think that I know a thing or two about policy-making. I was, after all, at the heart of policy-making in local and regional government at the height of its powers in Scotland until 1990; I also headed up a local government unit which preached the reform of its systems; and, in the mid 1980s I got one of the first Masters Degree in Policy Analysis. So I felt I understood both what the process should be – rational, detached and phased - and what in fact it was – political, partial and messy. I was duly impressed (and grateful) when the British Cabinet Office started to publish various papers on the process. First in 1999, Professional policy-making for the 21st Century and then, in 2001, a discussion paper - Better Policy Delivery and Design. This latter was actually a thoroughly realistic document which, as was hinted in the title, focused on the key question of why so many policies failed. It was the other (more technical parts) of the british government machine which showed continued attachment to the unrealistic ratonal (and sequentially staged) model of policy-making – as is evident in this response from the National Audit Office and in the Treasury model pushed by Gordon Brown.
The Institute of Government Think Tank has now blown the whistle on all this – with a report earlier in the year entitled Policy-Making in the Real World – evidence and analysis. The report looks at the attempts to improve policy making over the past fourteen years – and also throws in some excellent references to key bits of the academic literature. Based on interviews with 50 senior civil servants and 20 former ministers, along with studying 60 evaluations of government policy, it argues that these reforms all fell short because they did not take account of the crucial role of politics and ministers and, as such, failed to build ways of making policy that were resilient to the real pressures and incentives in the system.
The Institute followed up with a paper which looks at the future of policy making “in a world of decentralisation and more complex problems” which the UK faces with its new neo-liberal government The paper argues that policy makers need to see themselves less as sitting on top of a delivery chain, but as stewards of systems with multiple actors and decision makers – whose choices will determine how policy is realised. As it, with presumably unconscious irony states, “We are keen to open up a debate on what this means. There is also a third paper in the series which I haven’t had a chance to read yet.

In this year’s paper to the NISPAcee Conference, I raised the question of why the EC is so insistent on accession countries adopting tools (such as policy analysis; impact assessment; professional civil service etc) which patently are no longer attempted in its member states. Is it because it wants the accession countries to feel more deficient and guilty? Or because it wants an opportunity to test tools which no longer fit the cynical West? Or is it a cynical attempt to export redundant skills to a gullible east?

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!!  

Thinking

A cold but gloriously sunny morning here in Sofia (although eastern Bulgaria being lashed with rain and snow) – Vitosha’s 2 peaks capped in light snow making a marvellous backcloth for cycling on the cycle lanes, up Vitosha Boulevard to the old market area in the search for a tea set for entertaining. Then on to Sofia Art Gallery to buy the best book I know about Bulgarian painters in a European language (Die Bulgarischen Kuenstler und Muenchen - whose CD I had bought earlier but was not quite legible). Its focus is the influence of Munich’s Art Academy on Bulgarian painting in the century from the 1850s and it gives more then 40 painters a few pages each– many of them unknown to me. The route took us to the University area – so I decided to have another look at the Ilya Beshkov sketches I had been shown at a favourite gallery there – and bought three (including the one shown above which would have been very suitable for yesterday's post).

A friend recently asked for my recommendations for think-tanks which covered public management issues. My immediate thought was Demos and the Institute for Government which won last year’s UK Prospect Magazine’s Think Tank of the Year award) and which published in 2009 an important paper assessing how the British civil service compared globally. Despite this comparative element, however, most of their papers are, by definition, too tied to the current British (English) political agenda – which made me wonder about European Think Tanks.
The Wikipedia entry on the subject is actually quite useful – with good historical comment and a lot of links But a real find was a special website - On Think Tanks - which tries to pick up on ongoing themes. There are apparently now more than 6,000 such bodies in the world – a far cry from my early days when only the Rand Corporation and The Brookings Institute existed (we never thought of the Fabian Society in those terms). They seem to divide into four types –
• those which are strongly linked with academia and focus mainly on economic issues
• those which are explicitly sympathetic to a political party or set of political principles (the Fabian Society; the French political clubs)
• those funded (generally on a clandestine basis) by commercial interests to make the world a safer place for their pursuit of profits – particularly the extractive and drug industries. The campaigning journalist George Monbiot wrote recently about this. And the Mother Jones journal gave some useful examples of the link between funding sources and results. One website simply tracks the right-wing thinks tanks set up quite explicitly to protect the professedly "free market” agenda.
More entrepreneurial ones (a lot of which are found in central and east Europe) which offer bright ideas from a position of apparent independence

Of course, all Think Tanks profess their independence and rigour of methodologies but it is interesting that the European Commission is trying to insist that all Think Tanks register in the Commission’s Official Register of Lobbyists (albeit in a special section)
And, inevitably, we now have global league tables of Think Tanks – drawn up apparently with a highly arbitrary methodology
Diane Stone is a good analyst on the subject (not to be confused with Deborah Stone who wrote the best book on policy analysis – Policy Paradox!) who co-authored in 2004 what looks to be a great book on the global ThinkTank phenomenon Think Tank Traditions – policy research and the politics of ideas which has chapters on the various key countries. And you can read here a list of the German ones
Finally, a couple of speculative pieces on how Think Tanks need to smarten up their act – one which focuses on methodology; the other on technology