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

Identifying the real culprits

I haven’t said anything in the blog yet about the Occupy Wall St protest movement - which is most remiss of me. An article in what is a new magazine for me – Orion Magazine – expresses the issues very well

What is needed is a new paradigm of disrespect for the banker, the financier, the One Percenter, a new civic space in which he is openly reviled, in which spoiled eggs and rotten vegetables are tossed at his every turning. What is needed is a revival of the language of vigorous old (US) “progressivism”, wherein the parasite class was denounced as such. What is needed is a new Resistance. We face a system of social control “that offers nothing but mass consumption as a prospect for our youth,” that trumpets “contempt for the least powerful in society,” that offers only “outrageous competition of all against all.

There’s also a good post (and discussion) on the Real Economics blogsite And Jonathan Scheel has an eloquent piece in The Nation on the subject.
And yesterday I came across the website of the marvellously-entitled Centre for the Study of Capital Dysfunctionality – set up before the global crisis at the London School of Economics by a financier who simply became disgusted with his experiences and now writes and talks eloquently about alternative systems.
He and others produced a book about the Future of Finance last year which (like a lot of others I suspect) I missed. It can be quickly downloaded hereand should be read in conjunction with the report which came from the Vickers banking commission which was set up by the UK Government in 2010

The Occupy Wall St movement is overdue (see my blog the Dog which didn’t bark) and is explained by two simple emotions – anger and impotence. Anger at the greed and wealth of a tiny group of financiers who provide no service but simply use invented money to sustain a sick way of life for themselves which impoverishes the majority. And impotence at a political system which not only gave them this opportunity in the first place – but shows no sign of wishing or being able to rein them in.

A recent, mainstream American book Winner Take All – how Washington made the rich richer and turned its back on the middle class explores these questions. How did the incredible inequalities arise? And why is the American political system acting so perversely – with voters apparently supporting the parties whose governments dismantled the regulatory systems and created the mess? The book shows quite clearly that American government is in bed with corporate power. No surprise there for many of us in Europe – but a bit of an eye opener for the average American reader whose access to such books is fairly limited. An excellent review (and discussion thread)summarises thus -

The book downplays the importance of electoral politics, without dismissing it, in favor of a focus on policy-setting, institutions, and organization. First and most important – policy-setting. Hacker and Pierson argue that too many books on US politics focus on the electoral circus. Instead, they should be focusing on the politics of policy-setting. Government is important, after all, because it makes policy decisions which affect people’s lives. While elections clearly play an important role in determining who can set policy, they are not the only moment of policy choice, nor necessarily the most important. The actual processes through which policy gets made are poorly understood by the public, in part because the media is not interested in them (in Hacker and Pierson’s words, “[f]or the media, governing often seems like something that happens in the off-season”).
And to understand the actual processes of policy-making, we need to understand institutions. Institutions make it more or less easy to get policy through the system, by shaping veto points. If one wants to explain why inequality happens, one needs to look not only at the decisions which are made, but the decisions which are not made, because they are successfully opposed by parties or interest groups. Institutional rules provide actors with opportunities both to try and get policies that they want through the system and to stymie policies that they do not want to see enacted.

What is particularly interesting about the review is that it sets the book in the wider context of the malaise of American academic social science -

There is no field of American political economy. Economists have typically treated the economy as non-political. Political scientists have typically not concerned themselves with the American economy. There are recent efforts to change this, coming from economists like Paul Krugman and political scientists like Larry Bartels, but they are still in their infancy. We do not have the kinds of detailed and systematic accounts of the relationship between political institutions and economic order for the US that we have e.g. for most mainland European countries. We will need a decade or more of research to build the foundations of one.
Hence, while Hacker and Pierson show that political science can get us a large part of the way, it cannot get us as far as they would like us to go, for the simple reason that political science is not well developed enough yet. We can identify the causal mechanisms intervening between some specific political decisions and non-decisions and observed outcomes in the economy. We cannot yet provide a really satisfactory account of how these particular mechanisms work across a wider variety of settings and hence produce the general forms of inequality that they point to. Nor do we yet have a really good account of the precise interactions between these mechanisms and other mechanisms.

One of the discussants in the discussion thread on the book review asked what the European literature said on the matter. The only response was a reference to Wolfgang Streeck’s new book on Germany - Re-forming Capitalism; institutional change in the German political economy. Earlier this year I mentioned a couple of recent publications which have exposed the extent of big business influence on the EU – Bursting the Bubble (Alter EU 2010); and Backstage Europe; comitology, accountability and democracy by Gijs Jan Brandsma.
The painting is (of course) by Georg Grosz - Eclipse of the sun - about the military-industry complex

Can government ever change?

The UK Select Committee on Public Administration continues to do useful work – in identifying important questions to probe about the operation of government; and attracting witnesses from all sectors of society (including academia, Ministers and senior officials) to explore the issues with the Committee’s members. A few months it produced a report about government IT projects with the great subtitle - "recipe for rip-off". It is currently exploring the capacity of the civil service to deal with the Coalition government’s ambitious plans for "turning the model government upside down” – through contracting even more of public services to social enterprises. Its initial report Change in Government - the agenda for leadership came out last month and is tough not so much on the civil service as the government itself -

The Government has embarked on a course of reform which has fundamental implications for the future of the Civil Service, but the Government's approach lacks leadership. The Minister rejected the need for a central reform plan, preferring "doing stuff" instead. We have no faith in such an approach. All the evidence makes clear that a coordinated change programme, including what a clear set of objectives will look like, is necessary to achieve the Government's objectives for the Civil Service. The Government's change agenda will fail without such a plan. We recommend that, as part of the consultation exercise it has promised about the future role of Whitehall, the Government should produce a comprehensive change programme articulating clearly what it believes the Civil Service is for, how it must change and with a timetable of clear milestones.
In short, the Government has not got a change programme: Ministers just want change to happen: but without a plan, change will be defeated by inertia.

And this in one of the OECD’s “best governed countries” – according to a 2008 World Bank assessment. What chance, then, for the sort of cooperation between policy-makers, senior officials and academics in transition countries called for by the various analysts I quoted yesterday?
The report goes on to set out what it would expect to find in a reform plan -

62. We consider that a number of key factors for success specifically relevant to large-scale Civil Service reform are vital to the success of change programmes in Whitehall:
a) Clear objectives: there must be a clear understanding of both what the Civil Service is being transformed from and to, as well as the nature of the change process itself. This requires both a coherent idea of the ultimate outcome, but also how clarity on how to ensure coordination of the reform programme and how to communicate that throughout the process.
b) Scope: The appropriate scope for the reforms must be established at the outset; with focused terms of reference, but also wide enough to be able to explore all necessary issues.
c) Senior buy-in: A political belief that reform is needed must be matched by the same belief within the Civil Service and ministers, and both should be clear on their roles in delivering it. Sustained political support and engagement from all ministers is crucial.
d) Central coordination: Either the Cabinet Office or reform units such as the Efficiency and Reform Group must drive the change programme. This requires good quality leadership of such units and a method of working which ensures collaboration with departments, and Prime Ministerial commitment.
e) Timescales: There must be a clear timetable with clear milestones to achieve optimal impact and to ensure political support is sustained. The lifespan of the change programme should include the time taken for reforms to become embedded. Two to three years is likely to be the most effective; beyond this period reform bodies may experience mission creep.
63. Measured against the factors for a successful change programme, the Government's approach to Civil Service reform currently falls short. There is no clear or coherent set of objectives, nor have Ministers shown a commitment to a dynamic strategic problem solving approach to change. The Cabinet Office have signalled their commitment to change the culture of Whitehall, but we have not yet found sufficient evidence to imply a coherent change programme. In the absence of leadership from the Cabinet Office, departments are carrying out their individual programmes with limited coordination and mixed levels of success. Without clear leadership or coordination from the centre, setting out, in practical terms, how the reform objectives are to be achieved, the Government's reforms will fail

.Useful stuff!
We were snowed upon this morning in Sofia!
The painting is another Yuliana Sotirova which I have my eye on. Has a certain appropriateness for the theme of the post.....

Can political and academic leopards change their spots?

Tempus fugit! It's time already to think about a paper for the 2012 NISPAcee Conference - which,again, will be held nearby - at Lake Ohrid in Macedonia.
The two previous papers I have presented at NISPAcee Conferences (in 2007 and 2010) were about the role of Technical Assistance in building the capacity of public bodies in transition countries. They basically argued that –
• Technical Assistance based on the logframe approach and competitive tendering is fatally flawed - assuming that a series of “products” procured by competitive company bidding for discrete projects can develop the sort of trust, networking and knowledge on which lasting change depends
• The EC's 2008 "Backbone Strategy" has not improved matters – the audit which led to the review was narrowly focused on procedural issues in the procurement process and the Backbone strategy continues with this bias.
• Few comparative and longitudinal studies have been carried out of administrative reform in transition countries – and in particular of the effectiveness of the various tools in the technical assistance cupboard of administrative reform. The myriad evaluations which the EC commissions of its institution building projects in the Region are formalistic and difficult to find – largely because of the commercial basis on which most technical assistance in this field is carried out.
• we are, to put it mildly, rather hypocritical in our expection that tools which we have not found easy to implement in our own countries will work in the more politicised contexts of East Europe and Central Asia.

At the 2012 Conference, I propose to elaborate the latter part of this critique; with respect to three issues -

a. Can the leopard change its spots?
One common thread in those few assessments which have faced honestly the crumbling of reform in the Region is the need to force the politicians to grow up and stop behaving like petulant and thieving magpies. Nick Manning and Sorin Ionitsa both emphasise the need for transparency and external pressures. Cardona and Tony Verheijen talk of the establishment of structures bringing politicians, officials, academics etc together to develop a consensus (see section 10.4 of this paper on my website). As Ionitsa put it succinctly –

The first openings must be made at the political level – the supply can be generated fairly rapidly, especially in ex-communist countries, with their well-educated manpower. But if the demand is lacking, then the supply will be irrelevant.

This seems to imply an emphasis on civil society and democratisation – rather than institutional development.

b. Over-specialisation and lack of dialogueDepartmental silos are one of the recurring themes in the literature of public administration and reform – but it is often academia which lies behind this problem with its overspecialisation. For example, “Fragile states” and “Statebuilding” are two new subject specialisms which have grown up only in the last few years – and “capacity development” has now become a more high-profile activity. But the specialists in these fields rarely talk to one another – not least because of the professional advantages in pretending that theirs is a new field, with new insights and skills.

c. The superficiality of public managementInstitutions grow – and noone really understands that process. Administrative reform has little basis in scientific evidence (See the 99 contradictory proverbs underlying it which Hood and Jackson identified in their (out of print) 1999 book. The discipline of public administration from which it springs is promiscuous in its multi-disciplinary borrowing; new public management (still alive and well) is based on a mixture of dubious managerialism and theoretical eccentricities. Traditional PA was at least aware of politics and history. Technocratic NPM denies both.

My ambitious proposal for the 2012 NISPAcee Conference is to present a paper which will explore these issues through–
• A literature review of comparative assessments of administrative reform in the Region – and of the experience and lessons of the specific tools used
• A tentative exploration of the basis and contribution of the various “disciplines” to our understanding of institutional development

The painting is of St Joan Church on Lake Ohrid - by the esteemed Bulgarian Atanas Mihov (1879-1974)

Grim times for forgotten people

The house in the past week has been busy with guests – so not much chance to blog but lots of good conversation….wine and rakia. All of which needed in the colder and damp weather now being experienced here. So yesterday saw a trip to Teteven, nestling in the heart of the Balkan mountain range with the crucial aim of picking up local rakia from an old friend of Sylvie – my ex-landlady. After a speedy 80 kilometres on what must be the most scenic highway in the Balkans, a 3rd class road took us 18 kilometres through a lovely plain marked by signs of decline – but the industrial dereliction of Teteven still shocked us. The town straddles along a river and must have about a dozen derelict plants – of which the picture is typical. The only sign of economic activity is an Italian furniture factory. And a sad story of hopelessness emerged over the superb lunch which awaited us. Elections are in a few weeks – but the political class is seen as irrelevant and venal. I got the impression of a return to Hobbesian conditions – with youngsters having neither jobs nor hope; old people expected to live on a pension of 100 euros a month; and the European Union’s agricultural policy having shafted much of the rural self-sufficiency which produced such superb food in the past.

musical and visual tributes, visit to Dionysus shrine

First some musical tributes – sparked off by the very sad news that a guitarist legendary in my young days, Edinburgh-born Bert Jansch, has died - in his late 60s. I hadn’t realised he had an association with the Pentangle group which was a favourite of mine.
Billy Connolly, the great Scottish comedian, did a nice video on Jansch some years back.
Going down memory lane, I googled two other favourites of mine then - Pete Atkins (with words by the famous Clive James)and the Renaissance band

I visited Perperikon on Tuesday – an amazing medieval fortress topping a high hill with a superb 360 degree panorama (in the south to and beyond the Greek border). It was built in the place of an ancient Thracian sanctuary, related to the cult towards the Thracian equivalence of the Greek god of wine and feasts, Dionysius (known as Zagrey among the Thracians). It was discovered fairly recently; is still being excavated and is reckoned to have been built some 3,500 years ago - used for ritual sacrifices of animals and people. You have to be pretty fit to scramble up a steep trail for almost a kilometre – and then climb the stone staircases. I'm suffering today (knees)

Yesterday I had just over an hour’s drive to Blagoevgrad to visit a workshop on private-public partnership. Chatted with a couple of the participants and the trainer – then off to see the gallery of my favourite contemporary Bulgarian artist – Yuliana Sotirova. She is a very versatile painter – attracted to old buildings but good also with figures. She is also a sculptor (life size stuff). Before my visit, I had 6 of her paintings – including a magnificent oil one she did of my father from a black and white photograph which now hangs in my study in the mountain house. She must have more than 200 paintings in her studio – but after an hour she had 6 fewer.

This is one of a series of small paintings she has done of various church interiors - this one in Salonika. I will post others as space allows in the next few days.

The Guardian is the only UK newspaper I look at and was instrumental in Rupert Murdoch's recent humiliation. The Editor delivered recently a stirring (and rare) statement of the importance of a strong and free presswhich everyone should read.

And, if you are a cook and use garlic, this is a must-see video clip on how to peel a clove in 10 seconds flat without all the usual hassle (as a purist) I threw away my garlic crusher years ago