New Mutualism
The Third Way
by
Peter Kellner

This pamphlet represents the author’s interpretation of the
subject, not the policies of the Co-operative Party. The
pamphlet may not be reproduced without the express permission
of the Co-operative Party, or the express permission of the author.
The Co-operative Party is the political wing of the Co-operative
Movement. It promotes the application of Co-operative
Principles through elected representatives at all political levels.

Published by The Co-operative Party
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Printed by the Co-operative Press Ltd.
September 1998
Price: £5.00


New Mutualism The Third Way
Foreword

I would like to welcome the publication
of this pamphlet by the Co-operative Party as a valuable
contribution to the debate about New Mutualism
In New Mutualism, Peter Kellner argues that the principles of
mutualism can be applied to almost every decision that we
take. Instead of seeking to establish the primacy of any particular
ideology, his argument is concerned with finding
ways of promoting mutualist outcomes.
The debate around the ‘Third Way’ is about achieving outcomes
that truly benefit the many and not the few. It is about
the development of ideas which break from the traditional
public versus private battles.
New Mutualism expresses both the fundamental values of
mutual and co-operative societies and seeks to find modern
ways of expressing those values.
I look forward to the development of this debate with interest.

The Prime Minister
and Leader of the Labour Party,
The Rt. Hon. Tony Blair MP



The Seven Pillars of Mutualism

1. For a free society to flourish, the exercise of individual
liberty requires the acknowledgement of mutual responsibility.
2. Mutualism can thrive only when it is rooted in culture and choice,
rather than laws and coercion; it should be encouraged as far as possible, 
and enforced only when necessary.
3. Legitimate economic and political power may derive from a variety of sources; 
what matters is how it is used, how it is checked and how far it is dispersed.
4. Markets are social institutions that should both offer rights to, and demand 
obligations from, those who seek financial gain.
5. Government has a duty to promote responsible market behaviour; to act as an 
effective umpire it should, as far as possible, avoid being a market competitor.
6. Mutualism requires an inclusive society in which all have equal access to the
means to participate in it to the full.
7. Government has a duty to guarantee basic equality of access, but should, as far 
as possible, leave delivery to independent institutions exercising their mutual 
responsibility.


Preface

I first advanced the case for "mutualism" at the Prime Minister’s seminar on
the Third Way, at 10 Downing Street in May, 1998, and set it out in print in
an essay for the New Statesman (22 May). Peter Hunt, the National
Secretary of the Co-operative Party, has now invited me to develop the ideas
in that essay, and in an earlier New Statesman essay on "equality of access"
(17 October 1997). Hence this pamphlet. The Co-operative movement provides
one important and enduring example of mutualism in practice; however,
it is the contention of this pamphlet that it can, and should, exist in every public,
private and commercial institution: in the boardrooms of our banks and in
the classrooms of our schools; in shops and in factories; in trade unions and
in government offices. I am extremely grateful to Peter Hunt for providing this
opportunity to explore the principles and practice of mutualism in its broadest
sense, and to his staff for the help they have given - especially Jean Whitehead, 
who has contributed a number of the case studies that appear in these pages.

Peter Kellner
Setptember 1998


Peter Kellner is political columnist of the London Evening Standard and a contributor
to the Observer, New Statesman and BBC Radio and Television
(Analysis, Newsnight, election programmes). He has written, or contributed to,
a number of books, including The Civil Servants (1980), Fabian Essays in
Socialist Thought (1984), Britain Votes (1997) and A Fresh Start for Local
Government in Britain (1997). He was Distinguished Visiting Fellow at the
Policy Studies Institute (1990-91) and Visiting Fellow at Nuffield College,
Oxford (1993-5). He is a non-executive director of Political Context, a public
affairs consultancy.




Section 1. From Socialism to Mutualism

The trajectory of socialism has been the trajectory of the age of the
factory. Both grew up in the nineteenth century, reached their peak
in the middle of the twentieth century, and declined thereafter. To
use a phrase beloved of Marxists, this was no accident. Socialism in its most
familiar guise - an ideology concerned with the ownership of production, distribution
and exchange - sought to liberate workers from dangers, drudgery
and exploitation of factory life. As a political project, it did, of course, range far
wider; but at its core was a faith in collective industrial activism by people who
were brought together by collective industrial jobs.Such jobs have now largely
gone. The institutions that were spawned by the factory age have declined,
too: the blue-collar trade unions, the working men’s clubs, the mining villages
and factory towns, the large housing estates near to large industrial plants.
Socialism has now gone the same way. It has not disappeared, but it has
moved to the margins of political debate. We may regret, even deplore, this
fact; but we should not be surprised.
There is a further connection between the rise and fall of the factory age
and the rise and fall of socialism - more subtle, but arguably more profound.
Heavy industry nurtured not just the demands for socialism and the institutions
of socialists. It also provided socialism with its basic political metaphor: 
society as a vast machine. A socialist society would be planned. The government
- the biggest piece of machinery of all - would pull the levers of power, and
make our lives better in predictable ways. Policies would deliver outcomes as
remorselessly as conveyor belts delivering widgets. In 1939, when Douglas
Jay insisted that "the gentleman in Whitehall really does know better what is
good for the people than the people know themselves" he demonstrated arrogance
but also candour. He genuinely believed that those who controlled the
government machine were like skilled engineers who knew which levers to
pull, and what the effect would be.
That metaphor has gone the same way as the factory age and public
faith in omnipotent government. If a new metaphor is taking its place it is of
society as an organism: evolving, learning, unpredictable and with a life of its
own. It contains not levers to pull, but senses to be coaxed. The skills that are
needed to coax it in a particular direction are not those of the engineer, but of
the biologist, anthropologist and psychologist. Socialism, as we have come to
understand it, has nothing to offer.
Socialism as we have come to understand it. The qualification is
important.

Socialism as we have come to understand it is not how it started out. The word
"socialist" first appeared in November 1827 in the Co-operative Magazine - a
vehicle for the ideas of Robert Owen who sought to run his textile mill in Lanark 
on co-operative lines. In Owen’s world a socialist was someone who
co-operated with others for the common good. He was arguably an unrealistic
romantic in his attempt to banish selfish and competitive instincts; but one
thing he was not was an advocate of state control. For him, socialism was an
ethic by which people should run their lives, not an ideology by which politicians
should run their countries.
Five years after the word "socialist" enjoyed its first outing, "socialism" -or,
to be more precise, socialisme - appeared on the scene. It was coined by
Pierre Leroux, a French philosopher, in his publication, The Globe. He argued
that the role of society "is to give to all its members, to each according to his
needs, his capacity and his works, the enjoyment of the product of the common
labour, whether such labour be an idea, a work of art or material prosperity".
Such a view is clearly consistent with public ownership and a vast role
for the state, but it is not of itself a demand for state socialism. It could also be
regarded as a version of Owen’s co-operative ideal. Indeed, in the context of
its time, it could even be regarded as an antecedent of enlightened capitalism;
for France in the 1830s was still a pre-industrial society. The early French
socialists, such as Leroux and his mentor, Henri de Saint-Simon, were railing
against the owners of land and inherited wealth. They wanted the narrowly-owned,
locked-up wealth of the country to be freed and spread by bankers and
industrialists operating in the common interest.
The villain of the piece is Karl Marx. He converted an ethic, to do with
fairness, justice and co-operation, into an anti-capitalist ideology that sought
public ownership and state control. He was also responsible for implanting the
notion of society as a machine. Even those twentieth century socialists who
were repelled by Marxist ideas - such as Clement Attlee and the members of
his Government who reformed Britain after 1945 (including Douglas Jay) - still
adopted the metaphor.
This helps to explain why the many attempts to rescue "socialism" over
the past half century from the gangrene of Marxist thinking have been so
unsuccessful. The Marxist legacy has survived, not so much as an economic
doctrine but as an outdated way of regarding power, society and the state.
Revisionists have sought to remove the stain; but they have never got rid of
the smell.
In Britain, the record of noble failure involves some of the most important
figures in the Labour Party. In the mid-Fifties Anthony Crosland argued
the revisionist cause in The Future of Socialism. Hugh Gaitskell tried and
failed to translate a watered-down version of Crosland’s thinking into a new
Clause Four (weakening the commitment, written into Labour’s constitution in 1918, 
to the "common ownership of the means of production, distribution and exchange"). 
Harold Wilson resorted to homily ("socialism owes more to Methodism than to Marxism").
Neil Kinnock bravely fought the doctrine as well as the leaders of the far left
and, after he stepped down, proposed a new version of Clause Four. Tony
Blair finally succeed in changing the party’s constitution in 1995. He also
announced that his dream was not "socialism" but "social-ism".
During the Eighties and early Nineties, in the New Statesman and elsewhere,
I supported attempts to modernise "socialism" and redefine it for a
post-ideological era. Like Kinnock, I argued for a new Clause Four. Like Blair,
I hoped that a hyphen a day would keep the Marxists away, and that we could
recapture the word for the values and ideals that co-operators such as Robert
Owen advocated. The time has come to admit failure. The metaphor - the
smell - has proved to be too persistent. "Socialism" remains too closely associated
with notions of state power, of workers’ control, and of mechanistic
planning in place of market forces. Let us, then accept the inevitable and leave
"socialism" to the dwindling band of people who still believe in such things.
New Labour needs a new label.

Hence "New Mutualism". The Oxford English Dictionary defines
"mutualism" as "the doctrine that individual and collective well-being
is obtainable only by mutual dependence". Thus mutualismis not only different from 
socialism post-Marx; it is also the precise opposite of "no-such-thing-as-society"
Thatcherism. New mutualism asserts that we have both rights and responsibilities, 
and that social, political and economic institutions work best when all of their members 
respect each other. It seeks to rescue the virtues of co-operation, and the principles that 
gave birth to the Co-operative movement, from the strangling embrace of ideological 
socialism.  New Mutualism is not an ideology in the Marxist or free market sense.
It does not regard ownership of the means of production as the central issue.
More generally, it rejects the bias, implicit in both ideologies, to regard society
as a machine. For although Marx originated the metaphor, not only socialists
have adopted it. Many of the ideas of the free market right are equally
mechanical - witness its faith in privatisation, deregulation, competition and
low taxation. Like socialists, free marketeers tend to assume that all will be
well if the levers of power are in the hands of the right people with the right
skills, operating according to the right rules. What divides the old left from the
new right is who those people and what those rules should be; they are at one
in wanting to build the perfect society machine.
New Mutualism is a doctrine that regards society as organic rather than
mechanical. What matters is how power is used, rather than whether it comes
from a particular, approved source. Is it used healthily, in an open, far-sighted,
honest and fair-minded way - or unhealthily: secretively, short-sightedly,
unscrupulously and exploitatively? Examples of both "healthy" and "unhealthy"
power-play can be found in every kind of institution: in businesses, trade
unions, government departments, council offices, schools, health authorities
and voluntary organisations.
This does not mean that the ownership of power is unimportant. As one
speaker at the Prime Minister’s Downing Street seminar said, power is a vital
positional good. That is, its supply is limited. The more I have - in a company,
club, local authority or Whitehall committee - the less you have. Given the
human tendency for power to become a drug with ugly side effects, mutualist
principles cannot flourish alongside authoritarianism or in unregulated monopolies.
Mutualism favours the dispersal of power. (Devolution and freedom of
information are good mutualist policies.) However, it does not assert that there
is a single, "correct" system for acquiring economic power: either the free market
or state socialism.
Is there, though, another, more familiar term that would serve us better
than "mutualism"? Would not "social democracy" be a more useful, more widely
recognised term ? It also favours a pragmatic mixed economy and the
"healthy" use of power by people operating in an open and informed democracy.
And just as "socialism" has, historically, made the journey from ethic to
ideology, so "social democracy" can be deemed to have travelled in the opposite
direction: from its beginnings as a Marxist creed at the end of the nineteenth
century, to its anti-Marxist character today.

The problem with social democracy is that while it avoids the worst
excesses of ideology, it still carries connotations of large government, running
(however democratically and benignly) society as a machine. Social democracy
served the post-war generation well, giving Britain and much of Europe
decent welfare, health and education services, and owning or regulating many
of its most important industries when they had been run into the ground by private
owners before the war. That era, however, is now over. Let non-Marxist
social democracy be remembered as a worthy creed for a particular period of
our history, rather than pulled and twisted into a new definition.
What about "liberalism"? In The Observer (26 July 1998) Andrew Marr
has argued that Tony Blair’s Third Way "turns out to mean the revival of liberalism
inside a Labour body". Blair’s constitutional agenda "would have been
instantly recognisable to any follower of Gladstone, Hobhouse, Asquith or
even the young Lloyd George" [Blair’s] emphasis on personal duty, fiscal
rectitude from the state and, above all, education, education, education as the
key to social progress is neither new nor alien. It emerges directly out of the
non-conformist, progressive, British liberal tradition, which was buried
between the Thirties and the Nineties - the era of socialism and its enemies".
Only it wasn’t buried. The Liberal Party spent 60 years in the wilderness,
but it kept going, sometimes veering left and sometimes right, sometimes
in love with state power and sometimes deeply suspicious of it. Two
prominent Liberals, John Maynard Keynes and William Beveridge, arguably
had more influence on the shape of post-war Britain than any politician.
However to point to Keynes and Beveridge (as Blair has done) as major progressive
figures is to point to a critical problem of definition. What is liberalism?
The views of both men were closer to (and, indeed, helped to influence)
the thinking Britain’s post-war social democrats than the doctrine of late
Victorian free traders and Manchester School economists. Keynes and
Beveridge were certainly Liberals, but it is a moot point whether they were
really liberals.
The real difficulty with Marr’s argument is that liberalism has meant different
things to different people during the past century and a half. By select-ing
particular ideas from particular times, it is possible to call anyone from Ken
Livingstone to John Redwood a liberal. Marr has simply made a particular
selection and applied the label to Tony Blair. By the same token, one could
unearth Harold Macmillan’s views in the Thirties about social deprivation and
the "Middle Way", Rab Butler’s 1944 Education Act, Tory economic policy in
the Fifties and Edward Heath’s stance on Europe in the Sixties and Seventies
- and conclude that Blair is a "Conservative".
"Mutualism" has the advantage that it has been largely dormant through
the twentieth century. (When I first typed it on my computer, a squiggly red line
appeared under it: my Word For Windows programme did not recognise the
term.) It has been used, semi-technically, to embrace certain kinds of enterprise,
such as co-operatives and building societies; and more than a century
ago, it was associated with a form of idealistic anarchism. Biologists sometimes
use the word to describe a system of symbiosis in which two organisms
both need the presence of the other in order to thrive. But, unlike liberalism,
socialism, social democracy or conservatism, mutualism has not figured in
mainstream twentieth century debate. Thus it has not left a trail of change and
contradiction, or dispute about its meaning.

Besides, the world has moved on. Today’s political challenges are
different from those of a generation or a century ago. The age of the
large-scale factory is over; the rise of service industries, especially
in information technology, poses new problems. Patterns of work and company
management have changed. European politics and global markets affect
British life far more than before. Citizens and governments are more keenly
aware of the limits of state power, especially in the provision of welfare.
The case for a Third Way is that the free market right is rooted in the
wrong values, while the ideas of socialists and the social democratic left
belong to the wrong era. The case for this Third Way - New Mutualism - is that 
it is able to connect the core values of progressive politics to our new era. 
It is non-ideological, organic in its approach to society, and wary of excessive 
state power. It proposes a framework in which freedom and mutual responsibility can 
coexist,and in which fairness, opportunity and social harmony can be pursued without
pushing taxation to politically unacceptable levels.
Above all, New Mutualism returns to first principles: liberty, equality, fraternity.
(Yes, I know that "fraternity" has male overtones. But "co-operation" is
too instrumental and "solidarity" too narrow.) The central proposition of New
Mutualism is that liberty, equality and fraternity can be achieved only if we
develop a culture of mutual responsibility.
That basic argument is rooted in both ethics and anthropology. The ethical
point is reasonably obvious. Most of us think it "good" in principle to
respect, co-operate with, and behave thoughtfully towards our fellow citizens,
whatever our ultimate definition of "good" and however frequently we desert
those standards in practice. The anthropological argument is, perhaps, less
obvious, but no less central to the case for mutualism; for it shows that mutualism
is not just practical, but also goes with the grain of human nature. We
are genetically programmed to behave in a mutual manner.
How come? Richard Dawkins explored this issue in The Selfish Gene.
In Chaper 12, "Nice Guys Finish First", he argued that nature contains many
examples of "reciprocal altruism" - that is, creatures voluntarily supporting
each other: captive mice that lick the sores on each others’ heads; cleaner
fish that are allowed to eat the parasites off the surface of larger fish without
being eaten up themselves; bats that give food to hungry members of their
group rather than eat it themselves.
Each of these species has evolved in a way that allows it to solve the
"prisoner’s dilemma". In the original version of this conundrum, two men (say,
Potts and Kettle) are held in separate prison cells, both suspected of collaborating
in a crime. Their choice is to stay silent or blame the other. If Potts gives
evidence and Kettle stays silent, then Kettle is jailed for five years while Potts
goes free. If both men testify against each other, both spend three years in jail.
If both stay silent, then there is not enough evidence to convict on the major
charge; both men go to jail for one year on more minor charges. Potts does
not know what Kettle is saying; so what should Potts do?
If Potts gives evidence, he might go free; the worst that can happen to
him is three years in jail. If he stays silent, he is bound to go to prison, and he
may stay there for five years. His best option would seem to be to cheat on
the thieves’ pact and blame
Kettle. However, if Kettle follows the same logic, he too would speak out. Both
men would go to jail for three years. But if both men took the alternative "trusting"
option and stayed silent, both would be better off.
Dawkins argues that real-life versions of this artificial example occur
repeatedly in real life and throughout nature. Individual "cheats" may prosper
and the "trustful" suffer, but in the aggregate, the "trusters" do better than the
"cheats". (Though, like most generalisations, this should not be pushed too
far. Preys are wise not to trust predators; most lambs decline the opportunity
to lie down with lions.) Through the Darwinian process of evolution, the creatures
that survive and prosper are those that employ an optimum degree of
reciprocal trust, while persistent "cheats" go into decline. In the doctrine, "survival
of the fittest", the word "fittest" has a fuller meaning than merely
"strongest". Human beings are "fit", in the Darwinian sense, in part because
we are programmed to trust each other: if we weren’t we would not have
evolved as far as we have.
To Dawkins, evolution provides a better explanation than religion for our
ethical beliefs: the package of behaviour-codes we label as "good" is no more
than an expression of our genetic make-up; homo sapiens needs to continue
behaving well in order to survive. According to this view, it is not God instructing
us to be moral, but our chromosomes telling us: "be selfish: trust each
other".
One does not need to take sides in this argument in order to conclude
that mutualism, in its most basic sense of having regard to others, is vital to
civilised living. What is striking is that the complexities of modern life seem to
have reinforced, rather than demolished, that basic truth. The American political
scientist, Robert Axelrod, has used computer simulations to develop game
theory, and showed how sophisticated "trust" strategies have a greater chance
of success than those that employ no trust at all. Diplomacy works best when
there is trust: the Northern Ireland peace process provides a dramatic example
of this. And modern business theory asserts that trust-relationships, both
within and between firms, generally work better than relationships based solely
on formal contracts.

Mutualism, then, is a moral, genetic and practical imperative. What,
though, does it mean in practice? The remaining sections of this pamphlet
seek to answer this question.


Section 2. New Mutualism and Enterprise

Markets are not anarchic, atomistic things. Properly functioning
markets are elaborate social mechanisms which need to be well
constructed and carefully maintained. A mutualist approach
starts from the observation that these mechanisms need constant attention in
order to ensure that the market maximises social welfare (or, indeed, any
social objective). Mutualist doctrine disputes the free-market view that laissez-faire
policies automatically produce the most desirable outcomes; it also challenges
the state-socialist assertion that markets are bound to generate a more
brutal and divided society. Markets - that is, workers, consumers, employers
and investors entering freely into transactions and relationships for their mutual
benefit - are vital. The issue is not whether to have a market-based economy,
but what kind of market economy. How should the social mechanisms of
the market be designed if we are all to prosper?
The lessons from the capitalist economies of the West, as well as
from the former Communist society, are not as clear-cut as some freemarket
advocates have argued. We know that state socialism does not work, and that
its softer variety - monopoly state ownership of major industries such as
steel, coal, airlines and telecommunications within a mixed economy - is often
inefficient. We also know that "bandit capitalism" - rampant individualism in the
absence of a functioning state, the rule of law and a reliable banking system -does
not work either. However, even if we rule out both state socialism and
bandit capitalism, we are still left with plenty of territory within which we must
choose where to pitch our tent. What should be the role of the state? Are
shareholder-owned companies necessarily more efficient than other kinds of
enterprise? How can private interests be reconciled with the public interest?
What is the optimum degree of regulation?
In recent years discussion of these questions has tended to polarise
into a debate between the "Rhineland" and "Anglo-Saxon" models of capitalism:
the "Rhineland" model represents economies that are highly regulated
and relatively highly taxed, with public spending accounting for around 50 per
cent of gross domestic product; the "Anglo-Saxon" model stands for minimum
regulation and taxation, with public spending accounting for between 30 per
cent (US) and 40 per cent (UK) of GDP. Supporters of the Rhineland model
say it creates a safer, more united, socially cohesive, healthier, better educated
society with less crime and poverty. Supporters of the Anglo-Saxon model
say that it provides a more dynamic and prosperous economy, with greater
opportunity and less unemployment.
The truth is more complex, and more interesting, than the stereoptypes.
America’s economy has grown slightly faster over the last ten years
than those of France, Britain and Italy, but less fast than Germany. Such
aggregate data is necessarily crude, but it offers no support for those who
argue that the Anglo-Saxon system produces faster growth over the medium
term. What about jobs? Unemployment in the US, at 5 per cent, is certainly
lower than in continental Europe, where it currently hovers around 10 per cent.
However, much of this can be explained by its different culture and social
security system, and the huge numbers of young men who are in jail - men
who are more completely out of the labour market than if they were merely
unemployed. If we look at employment rates among men aged 25-54 - and
therefore steer clear of social and cultural differences between countries to do
with higher education, the penal system, early retirement and the economic
role of women - we find that America’s performance (around 88 per cent in
work) is similar to that of much of Europe.
Furthermore, in as far as the US has enjoyed steady growth in recent
years, it has been the result of good monetary management as much as -
some would say more than - free market freedom. If we are to look across the
Atlantic for lessons, one is surely that the central bank in charge of Europe’s
single currency should be managed with the same commitment to economic
expansion that Alan Greenspan has applied to his stewardship of the Federal
Reserve.
If we depart from economic statistics, there are other reasons to be cautious
about crediting too much to America’s free market. Compared with
Europe, the United States suffers more violence, inequality and drug abuse,
and far less social protection. If you are poor and sick, you will fare better if
you live in Berlin, Brussels or Birmingham, England, than if you live in Boston,
Baltimore or Birmingham, Alabama.
The more fundamental truth is there are things to applaud and things to
put right on both sides of the Atlantic. For all its faults, the Unites States enjoys
many blessings: an output per head that exceeds Europe’s, an open, can-do
culture, some of the world’s toughest anti-trust laws and a clear lead in the
development of information technology. Equally, for all Europe’s virtues, it
does need to change some of its ways if it is to compete effectively in an
increasingly global market for investment and jobs, as well as goods and services.
There is something more. For all their supposed differences, there are
more similarities between the Rhineland and Anglo-Saxon experiences - as
distinct from models - than the more partisan advocates from either side normally
care to admit. In America, Britain and the rest of Europe there are companies
that take their social responsibilities seriously, and those that seek to
extract the last penny in profit, even if this harms the interests of workers, consumers
or the environment. The real differences arise from the legal, fiscal
and regulatory frameworks in which companies operate. The United States
offers a low-tax, minimum-social-regulation environment; Europe provides a
higher tax, more regulated environment. Mutualism in the United States is
largely voluntary; mutualism in Europe is in some respects compulsory.
Neither is wholly satisfactory. In the United States too much is loaded onto the
ethical judgement of company executives, and too few obstacles are placed in
the way of free-loaders; in continental Europe, the approach has, perhaps,
tended to be too mechanical and over-regulated.

The task is to create a framework in which mutualist behaviour is the
norm. One important ingredient is variety in forms of ownership and
control. Alongside conventional companies owned by shareholders
need to be co-operatives and partnerships. A thriving financial industry needs
"mutual" building societies and insurance companies owned by their members.
Credit unions are helping people shunned by the clearing banks; charities
and the wider voluntary sector often deliver services that the market
ignores. Such enterprises are not only valuable in their own right;
they often set standards against which conventional companies can be
judged. Examples are mortgage interest rates charged by building societies -often
lower than those set by the clearing banks - and the initiatives by the Co-operative
Wholesale Society on ethical sourcing.
Yet most significant enterprises will continue to be owned by share-
holders. How should the principles of New Mutualism be applied to them?
That some regulation is necessary should be beyond dispute: the social
mechanism that generates a healthy market is not something that comes
about spontaneously. For example, we know that unregulated markets tend
towards monopoly. Indeed, the essence of profit-maximisation is often the
avoidance or elimination of competition: by cornering a particular market, or by
creating an "exclusive" new product or service, by taking over rivals, or by driving
them out of business. At the very least we need tough anti-monopoly
laws.

Do we need much more than that? Some on the right would say no:
governments should legislate for rigorously free competition and nothing much
more. Everything else, they say, will then fall into place: investment, prices,
wages, employment. The more that regulation interferes with competition, the
greater the risk that the economy will underperform, prices will be too high and
jobs will be lost. This proposition, however, falls on two counts. First, free com-
petition is an impossible dream. Legislation can help to limit the degeneration
of an existing competitive market into a monopoly. It cannot easily prevent the
emergence of monopolies in new products or services, or undo natural
monopolies. Nor cannot it stop companies extracting near-monopoly profits by
generating and then exploiting distinctive brand loyalty. When I use Microsoft
programmes on my computer, or watch a Premier League football match on
Sky Sports, or post a letter, or take a Thameslink train into London, or fly
across the Atlantic in a Boeing jet, or buy a ticket for Disney World - whenever
I do any of these things I am dealing with an actual or quasi monopolist.
Second, even where there are competitive markets, larger public
interests may be violated. Think of companies that seek to cut costs in order
to maintain a competitive cutting edge, by emitting more pollution or by paying
just £2 an hour to security guards. In formal terms, competition alone cannot
deal with the issues of external costs, which are liable to include impact on
the environment, or social cohesion.
So, "cry competition and let loose the dogs of commerce" is an inadequate
philosophy. Companies need to act - and, where necessary, made to
act - in ways that reflect their wider obligations to the society that sustains and
protects them. For some on the Right such an approach reeks of a statist
desire to undermine the market and minimise competition. This, however, is to
make the same mistake as those who resisted social reform in the late nine-
teenth and early twentieth centuries. Far from killing capitalism, social reform
saved it, by mitigating its impact on much of the population. By the same
token, New Mutualism is concerned to create the conditions in which markets
and competition can continue to thrive - by addressing those problems that the
market cannot solve, and sometimes exacerbates.
That is why a mutualist government opposes monopoly where it can,
and seeks to extend consumer choice as far as possible, but goes further. As
well as framing a tough competition law (which would include laws on predatory
pricing and media cross-ownership that would seek to channel Rupert
Murdoch’s empire into truly competitive endeavours), it also legislates against
poverty pay, upholds consumer rights and encourages partnership between
managements and trade unions. However, given the right system of public-interest
regulation (including legislation to curb profiteering and other anti-social
actions by monopolies where competition fails to do the job), it prefers
goods and services to be traded independently of direct government control:
in political economy, as in sport, it is impossible to be both a hard player and
a fair umpire. Past experience, in Britain and abroad, shows that the state seldom
gets the best out of companies that it both controls and regulates; wherever
possible the two functions should be kept separate. And since regulation
is, by definition, a function that must be discharged by the state, it follows that
control should normally be exercised by people independent of ministers.
Exceptions should be rare, and require specific justification. So, for example,
ministerial discussions about the future of the Post Office or the London
Underground would start with the objectives to be achieved, and progress
from there to a decision about the best way to run them. This will almost certainly
be as independent enterprises; but in each case the judgement about
ownership - private, public or some mix of the two - should be shaped by circumstance,
not dictated by dogma.

How? Regulation must play an important part along with other sticks
and carrots, such as taxes and subsidies. These clearly have a significant
role. Health and safety legislation, equal opportunity laws, environmental
taxes and so on: all help to set the boundaries of acceptable behaviour. Such
regulatory systems, however, suffer two problems: they are apt to go too far and
at the same time, they often fail to do enough to prevent bad behaviour.
They go too far when they tie companies in bureaucratic knots; but they miss
their target when they allow company lawyers and accountants to find loop-holes
to exploit. Besides, the notion of regulation assumes infallible wisdom
and total objectivity on the part of ministers, officials and regulators. Merely to
list those assumptions is to draw attention to their absurdity. New Mutualism
is a philosophy for a fallible world. It accepts that people, enterprises and public
institutions are all liable to make mistakes. It therefore seeks to place only
limited reliance on regulation (and even less on ministerial discretion), just as
it is wary of expecting too much from market forces or perfect competition.
Yet if the limits to regulation are recognised, what is there left to do?
Unless companies are forced to serve the public interest, why should they
ever do anything that does not maximise returns to their shareholders at the
expense of other stakeholders? As long as company law puts the interests of
shareholders above those of employers, consumers, the public interest and
the environment, surely any conflict of interest is bound to be settled in favour
of the shareholders?
Formally, the answer is: yes, shareholders hold the trump cards. But
the thinking behind such questions often seems to ignore a more complex
truth: that our business culture is changing; that shareholders are often best
served when the interests of other stakeholders are acknowledged; and that
companies that disregard the public mood and/or damage the environment
often find themselves in trouble. The mutualist message - that enterprises, like
individuals, flourish best when they acknowledge their duties as well as claiming
their rights - is beginning to get through, and on both sides of the Atlantic.
Business executives are discovering that the best solution to the "company
dilemma" is often the same as the solution to the "prisoner’s dilemma" - to pursue
a strategy of responsibility, good citizenship and reciprocated trust.
Consider America first. To be sure, it contains businessmen such as Al
Dunlap, whose book Mean Business argued that the sole duty of a company
was to maximise its profits. His favourite technique is to squeeze costs and
sack as many workers as possible. His record, however, is not that good
beyond the short-term. His latest company, Sunbeam, has just dispensed with
his services because he produced no lasting growth in the company’s business
of making small domestic appliances.

In contrast, long-term success in the US is often accompanied by an
ethical dimension - such as the Ronald McDonald children’s hospitals that are
built by the McDonalds fast food chain. Or consider the credo of Johnson &
Johnson, which has done the company no harm since its President Robert
Wood Johnson first formulated it in 1943, putting its customers, employees
and the community ahead of immediate financial returns to its shareholders. 
What Johnson & Johnson have discovered is that sensible ethical
policies are usually good for business. Some years ago, some Americans died
after bottles of the company’s Tylenol pain killers were tampered with. The
company’s immediate response was to recall every bottle in the country. As
Charles Handy has pointed out in The Empty Raincoat, profits fell in the short
term - but rose in the longer term as its public reputation soared.
In Britain, too, the best companies have found that ethical behaviour
can make good business sense in a free-market environment. Look at Marks
& Spencer, a private company, and John Lewis, a partnership embracing the
entire staff: both flourish by making their workers feel wanted and
secure. Or the way Rover has turned from a loss-making car manufacturer
with appalling labour relations into a profitable company that now respects its
workforce. Or the way Shell and B&Q have responded to public pressures to
behave more responsibly towards the environment.
These individual initiatives have taken place within a wider context in
which issues to do with corporate responsibility has climbed the public agenda.
This has emerged in a number of ways, such as: the work of Business in
the Community (the charity whose president is the Prince of Wales), the
growth of "ethical" investment funds, criticism of "fat cat" salaries; and the way
large companies are increasingly submitting themselves to environmental
"audits" of their operations. Trade unions - the traditional opponents of shareholders
in a battle to divide the fruits of company income - have acknowledged
the change. In the words of John Monks, the TUC’s general secretary, speaking
to trade union officials in Scotland in the spring of 1998, "the days when
you joined the unions to bash the boss are over". For Monks, as for most leading
trade unionists these days, partnership now provides a better strategy than
confrontation.
One of the most significant initiatives has been the inquiry by the Royal
Society of Arts into "Tomorrow’s Company". This two-year inquiry, which
brought together senior executives from 25 of the UK’s biggest companies
and which reported in 1995, argued that "there are too few world-class companies
in the UK. We are not creating enough new ones". Among the historic
weaknesses that report identified was "over-reliance on financial measures of
performance". The report also highlighted "the growing importance of environmental
issues and the death of deference among employees, customers and
communities". Above all, it stressed "the increasing need for companies to
maintain public confidence in the legitimacy of their operations and business
conduct - in other words, to maintain their licence to operate." (Report’s emphasis)
It would be daft to pretend that every large company shares those views
- or that those claiming to do so, interpret these general injunctions as fully as,
say, trade unions or Friends of the Earth would wish. Yet the climate within
which businesses operate is undoubtedly changing. As Shell, B&Q and other
companies have found, the "licence to operate" is harder to acquire than it
used to be.

Does this mean, then, that there is fundamentally nothing to worry
about - that anti-social behaviour designed to increase profits will
always prove counter-productive, and that as long as companies
behave rationally in pursuit of self-interest, all will be well? We only need to
read a newspaper on a typical day to find that bad behaviour remains all too
common. Either the rational case for enlightened self-interest does not apply
to all companies; or some companies persist in acting irrationally; or - most
likely - both things are true.
Nevertheless, the fact remains that New Mutualism goes with the grain
of the best corporate culture. It seeks to spread existing best practice, not to
overturn an economic system that is systemically evil. And one of the most
effective ways to spread best practice is to build a social and political culture
in which companies become ever more conscious of the terms of their "licence
to operate" and of the need to maintain the confidence of their employees,
customers and the wider public. One of the aims of New Mutualism is to build
a set of values that companies (like other institutions) choose to adopt, for they
fear a backlash if they fall short of the standards expected of them. This will
not happen automatically. It is as demanding as designing new laws, but,
done effectively, more likely to have lasting, beneficial effects; for in their quest
for profits, companies would seek not merely to avoid breaching laws and regulations,
which is a negative and sometimes devious activity; they would also
act positively to improve their reputation. Hence the maxim that mutualism
should be encouraged as far as possible, and enforced only when necessary.
New Mutualism has one crucial ally on its side: knowledge. Already it
can be argued that information technology has made possible the campaigns
and cultural changes that have already influenced companies such as Shell
and B&Q. Greenpeace has been adept at employing television, satellite and
Internet technologies to obtain and disseminate information. Companies,
almost as much as politicians, are having to adjust to an era in which they are
subject to constant scrutiny, and in which any failing, once discovered, is promulgated
round the world almost instantly. Within companies, too, information
technology is destroying old, hierarchical structures. The old Taylor model of
industrial organisation is dying out: few workplaces are still divided between
bosses who think and workers who pull levers. Now, thinking has to be done
at every level; and co-operative thinking is the most effective kind. As BG’s
John Wybrew argues, we are moving towards a "connected economy" in
which companies will be far less able than in the past to take their employees
or customers for granted. Companies will need to be more open,
managements more flexible, and internal and external networks based more
on trust if they are to succeed.

The main thrust of a mutualist policy towards enterprise should be to
support and promote the trends identified by the "Tomorrow’s Company"
report, the moves towards social and environmental auditing, and the recognition
by companies that their "licence to operate" includes obligations towards
the societies that protect them. This process needs to engage people across
society: trade unions, reflecting both the interest and knowledge of their members;
local authorities and Training and Enterprise Councils, working with business
locally; the media, collecting and publishing information on corporate
behaviour. The state, too, has a large role that goes beyond regulation. The
power of government to affect the climate and culture is limited, but by no
means negligible. It can actively support co-operative and voluntary ventures,
especially in reviving run-down areas and in promoting its welfare-to-work
agenda. Government also has a bully-pulpit; and it can name-and-shame.
"The unpleasant and unacceptable face of capitalism" is a phrase that was
coined by a Conservative Prime Minister (Edward Heath in 1973, describing
Lonrho); Labour ministers should be prepared to be equally forthright when
occasion demands.
Beyond that, more formal changes in three areas would help to advance mutualist 
principles.
First, the knowledge-revolution should be re-enforced with legislation
that requires companies operating in Britain to provide full disclosure of infor-
mation regarding wages, working conditions, equal opportunity policies, energy-
use and impact on the environment - both in the UK and abroad.
Companies with good records in these areas should emerge with their reputations
enhanced; those with worse records would be confronted with the
choice of mending their ways, or facing public criticism and taking “naming
and shaming” risks with their “licence to operate”.
Second, greater use should be made of a device employed first in the
United States almost 60 years ago and subsequently adopted in Britain: contract
compliance. In 1941 President Roosevelt signed Executive Order 8802,
which outlawed race discrimination by defence contractors. Twenty years later
President Kennedy inserted equal opportunity “affirmative action” clauses into
contracts between private companies and federal agencies. In the Eighties, a
number of local authorities, led by the Greater London Council, adopted the
same principle of contract compliance. The GLC established an “approved list”
of 20,000 companies that demonstrated a commitment to uphold laws banning
discrimination on grounds of gender, race and disability; only companies on
this list could tender for GLC contracts. Conservative ministers condemned
the GLC’s policy - but later adopted much the same course in Northern
Ireland, when it sought to prevent companies that practised religious discrimination
from obtaining government work.

The time has come to widen the use of contract compliance. If B&Q can
force its suppliers to adopt environmentally friendly policies, so should central
and local government. One option would be to adopt the practice of the
defunct GLC and require companies tendering for contracts above a certain
amount to have “approved” status - a label that would be earned by companies
passing certain standards (possibly administered by the British Standards
Institute) of ethical, social and environmental conduct. Another option would
be to adapt the idea of “yellow” and “red” cards used in Soccer; companies
that infringe laws and regulations in areas such as pollution, minimum pay,
union recognition, unfair dismissal, health & safety and the implementation of
EU directives, would be warned about their conduct - and any company that
offended persistently or seriously would lose the right to tender for public contracts
for a given period.
Third, there is an opportunity to recast the role of institutional investors.
The notion that shareholders are apt to have a conflict of interest with other
stakeholders assumes that the two groups are different kinds of people. In
reality, they are much the same. Around 80 per cent of shares in a major company
are owned by institutions - which means that they are held on trust for
people with pensions and other savings. Companies that pollute the environment,
exploit their workers, give poor value to consumers, or take an excessively
short-term view of research and investment are often acting against the
interests of their ultimate, beneficial owners.
Moreover, by their very nature, institutions hold shares in a wide range
of companies. It is in their interest to ensure the best aggregate performance
by the companies over the medium-to-long term - not necessarily the best performance
of individual companies in the short term. Pensions Investment
Research Consultants have proposed amending company law to impose on
institutional shareholders a “duty to vote” at company general meetings. This
duty could be linked to a requirement to take a broad view of the interests of
all the people whose savings they control. Such a reform would have
increased force if the tax system were adapted to encourage institutions more
to hold their shares for, say, five or more years rather than look for short term
gains.
Already the Government seems to be beginning to travel in this direction.
In July 1998 John Denham, the Minister for Social Security, unveiled
plans for pension fund trustees to disclose to what extent they had taken
account of ethical and social considerations in their investment strategy. It
would not be difficult to go further. Pension fund trustees are already required
to compile a statement of investment principles. The law could be amended to
ensure that such statements embrace broad social, ethical and environmental
principles.
These reforms will not eliminate crooks or pollution or exploitation
overnight. No laws and no culture ever can. Nor will they dispel every short-term,
profit-maximising pressure from financial dealers who are more concerned
with derivatives and the futures market than the underlying performance
of British companies.What can, and should, be done is to nurture variety
in forms of ownership, and encourage mutualist behaviour in all sections
of the economy. This is a large task - but it is made feasible by the fact that
mutualism is ingrained in human nature, and seeks not to overthrow the current
economic order but to learn from the actions of its best practitioners.


Section 3 Equality, Liberty and the State

A healthy economy is a necessary condition for a healthy society, but
it is not a sufficient condition. If all companies applied mutualist
principles to the full, many people would be better off, more secure
and better respected. But if nothing else changed, many problems would
remain. The danger of redundancy could not be eliminated; unemployment
would still occur; poverty would still afflict the lives of millions, and our cities
would still be disfigured by grim housing estates. Nor can domestic companies,
however well managed, insulate themselves from the insecurity and sudden
shocks that can afflict any country in an open global economy. The “social
question” - how can we create a cohesive society in which everyone feels they
have a stake? - would still need to be answered.
A mutualist strategy starts from the principle that state and citizen have
reciprocal obligations. This implies a common polity, which in turn requires
some notion of equality and social cohesion; for if the state allows excessive
inequality and division, then many people will feel excluded from the bargain.
The state will not have behaved reasonably towards them: why should they
behave reasonably towards the state?
However, that principle is far easier to assert than to apply. At the root
of the problem is the definition of equality. The word, and the general idea, has
inspired progressives since the French revolution. But its meaning has never
been pinned down by mainstream parties. The centre-left now needs to
rethink its approach to equality in much the same way as it has needed to
rethink its approach to the ownership of the means of production, distribution
and exchange. In the Eighties, the poverty of the left’s thinking on economic
organisation allowed the free market right to capture an ideological initiative.
In the Nineties, the centre-left’s failure so far to produce a robust definition of
equality risks ceding the debate to those who deny that inequality matters.
My contention here is that the values of mutualism can, and should, be
linked to a new definition of equality that is both relevant and robust. It is
“equality of access”, and it is underpinned by three principles:
a) Equality should be defined to apply to everyone at all times: to
rich and poor, to men and women, to black and white, to those
who pass exams and those who fail them;
b) When the principle of equality is invoked, it should be for its
own sake, not merely as a stepping stone to some wider
social objective;
c) Equality is ultimately about humanity, not money. Greater
financial equality is undoubtedly necessary; however, money
is a means to an end, not the end itself.
“Equality of access” casts its net far wider than equality of outcome and
equality of opportunity. It is concerned not just with the skills and material
means that contented citizens need, but with information, power, security,
health and justice. It is about rights at work and the freedom to walk through
streets without fear. “Equality of access” proposes that a mature democracy
should strive for a range of equal membership rights for all its citizens, involving
parity of access to those things that, together, comprise a just and healthy
society. It is on that basis that, in return, the state has the right to expect all
citizens to accept their reciprocal, mutual responsibilities. Here is a provisional
list of equality-of-access rights:

Everyone should have equality of access to...
 - the ballot box
 - the information that enables people to hold to account those who
wield power, public and private, in their lives
 - competent, affordable representation when in discussion or dispute
with those who wield power
 - safe and peaceful neighbourhoods
 - fair treatment by the police and courts
 - reasonable, affordable housing
 - healthy, affordable food
 - prompt and appropriate medical treatment when needed
 - (for children and young adults) education that will enable people to
achieve their full potential as adults
 - (for adults) employment that does not violate the employee’s dignity
or health

That list doubtless contains defects and omissions. However, it seeks
to set out a range of issues in which (in the view of this writer at least) equality
has an intrinsic virtue. The most obvious example is the ballot box: every
elector should have one vote. Equality of the franchise is the essence of
democracy. Even here, though, the emphasis is on access rather than use. An
elector may choose to abstain. Elections are decided by those who vote, not
by those who stay away. The key thing is that every elector should have equal
access to the ballot box; which is why we allow postal or proxy votes to those
who are unable to attend the polling station in person on election day.

That is a relatively simple, uncontroversial example of equality of
access, one which is applied to a large extent (though not completely:
witness the difficulties many homeless people face when
they seek to join the electoral register.) Others are more complex. Equality of
access to information does not just concern central government, but local government,
the public services and private business. There is obviously room for
debate about how much information should be made available and what can
reasonably be kept confidential. It is also, equally obviously, the case that
some people will end up better informed than others - those who are determined
to find things out will know more than those who cannot be bothered.
But as with the ballot box, the primary issue is access.
Or consider food. Few would suggest that we should all eat the same,
or that everyone should be able to afford a daily helping of caviar. Nor can a
free society insist that everyone has a healthy diet. If some people choose to
eat too many fried chips and cream buns, and too few lentils and grapefruits,
too bad. Equality of access to healthy, affordable food means something different.
In fact it means two things: first, that incomes should be high enough
(and/or food prices low enough) for everyone to be able to afford a healthy
diet; secondly, that shops that sell good-value, healthy food should be readily
accessible to all. Too many inner-city households, especially single-parent
families, live in “food deserts”. Supermarkets and good greengrocers are
beyond easy reach to those without cars; local corner stores charge high
prices and sell little that is fresh and in good condition. For people living in food
deserts, equality of access is partly about income and partly about the nature
of our retail system. Some means of coaxing Tesco, Sainsbury to set up more
small “metro” supermarkets in poor housing estates might help as much as an
increase in social security benefits to equalise access to healthy, affordable
food. (The Co-op record is better.)
Likewise with “credit deserts”. The clearing banks have withdrawn
increasingly from our most run-down areas, with the result that people who
need to borrow money are often forced to turn to expensive unsecured loans
from other money-lenders - and sometimes to loan sharks. Credit unions,
operating on the best principles of mutual support, are now emerging to fill this
gap ; if they could be linked to a wider set of initiatives to coax the
large banks back to “difficult” areas (possibly including new kinds of partnership
between conventional and co-operative financial ventures), then equality
of access to basic banking services could be attained.
Advocates of equality of outcome have a ready response to this argument.
If incomes were distributed more evenly, there would be no food deserts
and no credit deserts. There is clearly some truth in this. Poverty is one of he
biggest causes of inequality of access. It is inconceivable that equality of
access can be achieved without a significant increase in the incomes of the
poorest households. The argument, rather is that poverty is not the only problem,
nor higher state benefits the only answer. Some poor people have easy
access to supermarkets; some less-poor people do not.
Likewise - indeed, even more so - with health care. Most people depend
on the National Health Service. Its quality affects almost every family. Does it
provide everyone in need with prompt and appropriate treatment? Or are there
groups who have worse access than others - the inarticulate, the elderly, residents
of the wrong region or the wrong part of town? Does the (probably
inevitable) concentration of the most modern, high technology facilities into
fewer, larger hospitals, give car-owners an advantage over less mobile citizens?
Many of the problems caused by the closure of smaller, older hospitals
relate to the fact that people who used to live only a walk or short bus-ride
away, now find it hard to reach newer hospitals either for outpatient treatment
or to visit friends and relations unless the local transport system is improved
with new bus services and/or subsidised fares. All these issues have clear
consequences for equality of access, but little obvious connection with equality
of outcome as it is normally defined.
Thus “equality of access” is more realistic than “equality of outcome”
and goes further than “equality of opportunity”. It sets a wide series of challenges
to politicians who call themselves progressive; indeed, there are few
areas of public policy that “equality of access” does not touch. At the same
time, it avoids ideological rigidity. It does not demand a particular form of economic
organisation, or ownership of industry, or tax regime; it does not prescribe
a particular, maximum range of incomes; nor does it say that wealth is
bad. Rather, it invites those, inside and outside government, who design policies for 
the economy and social security, industry and education, the police
and the health service, transport and housing, to measure the impact of their
plans against equality of access criteria.
Equality of access does not merely shift the debate: it also provides
fresh criteria of how to judge the attainment of an “more equal” society. A simple
indicator - showing, say, that the real incomes of the poorest ten per cent
have risen relative to the national median - would not be enough. Equality of
access demands that the victims of inequality should also be able to live in
decent housing, buy healthy food, secure better education for their children,
obtain good health care, use public transport and walk in safety at night round
their neighbourhood.

Well run and properly-funded services for everyone, then, are vital to a mutualist 
society that provides equality of access.
However, in its approach to the organisation of those services,
New Mutualism shifts the emphasis from the traditional input-based approach
(how much should the public sector spend?) to one defined by outputs (what
do we want to achieve?). Contrary to the dream of the state-socialist left,
mutualism involves no prior belief in the innate superiority of state provision.
As Ted Gaebler and David Osborne argued in 1993 in Reinventing Government, 
the state’s task, wherever possible, should be to steer, not row:
to set clear social objectives and design the framework for achieving them, but
to leave the implementation to others.
This approach leads to a far more flexible approach than the left has traditionally
embraced. Suitably regulated (and, where necessary, subsidised)
private provision could help the attainment of public policy targets for training,
pensions and low-cost social housing. In the case of transport, there is a
strong case for more private provision than today (for example, privatising the
motorway network and turning it into toll roads), but at the same time a more
thoroughly integrated public transport strategy, directed by the government.
New Mutualism is not just about national strategy. The institutions that
deliver public services - whether publicly owned, such as schools, or independently
managed, such as housing associations or railway companies -must
be open and responsive. A school is not merely the local delivery vehicle
for a national education policy; it has its own life and ethos. It needs its own
micro-mutualism: good relations between staff and pupils, between parents
and governors and so on. As with the best business practice, New Mutualism
is about culture, not just rules.
It is also about reciprocity: about the use that pupils and parents make
of the education system, and about trainees taking advantage of the training
given to them. New Mutualism is a two-way street. State and citizen have the
right to expect responsible behaviour by each other. This philosophy is clealy 
evident in two green papers published this spring: on public health and on
welfare reform. If we want a healthier society, it is as much up to us not to eat,
drink or smoke too much, and to take adequate exercise, as it is for the government
to ensure an adequate supply of doctors and hospitals. And if we
want to eliminate poverty and unemployment, then part of the onus lies with
people to take the job opportunities that are open to them and to save for their
old age.
This leads to a broader point, concerning the limits to personal freedom.
New Mutualism has an anti-authoritarian bias. It starts from the premise that
outright bans are undesirable, for bans remove one of mutualism’s main
injunctions: that people should take responsibility for their own actions.
However, mutualism does not go the whole libertarian hog: let people smoke
wherever they want, sell heroin, drive when drunk and carry handguns. The
mutualist approach is to test each proposed restriction against a clear principle:
the gains to others must unambiguously outweigh the loss of freedom suffered
by those whose freedoms are restricted. On that calculus it is right to ban
racial incitement, drink-driving and tobacco smoking in offices and cinemas,
but wrong to ban abortion, pornographic magazines, beef-on-the-bone and
the private consumption of cannabis.
Other issues are harder to call. Is it right to outlaw ecstasy tablets but
not whisky? What restrictions should be placed on the distribution of material
on the Internet - or on the television when children might be watching? Should
supermarkets be allowed to stay open for longer than six hours on Sundays?
New Mutualism does not offer easy, off-the-peg answers. (Doctrines that do
are invariably flawed.) It does, however, provide a way in which greater consistency
and clarity can be applied to the evolution of public policy. In particular,
mutualist principles could be used to inform a rational debate about the
laws on soft and hard drugs, replacing the current sterile shouting match
between libertarians and authoritarians.

Running through this pamphlet’s discussion of New Mutualism - in
terms of markets, equality or access or personal liberty - is a common
theme: the need to address both process and outcomes. The
contention here is that a healthy society is one in which both are mutualist.
However, this argument prompts an awkward question. What happens when
the two conflict: when a mutualist process leads to a non-mutualist outcome,
and a non-mutualist act of authority is needed to ensure a mutualist outcome?
This issue is liable to arise whenever the public interest needs to be
invoked - in relation to the interests of both today’s public and tomorrow’s. For
example: objectively, it may be a good mutualist policy to curb the use of cards
in city centres and increase subsidies to public transport; but democracy is
often a subjective business, and fears of change and disruption may be too
strong for a responsive political process to overcome. (That is not an entirely
notional example: witness the debates both before and after this year’s transport
white paper.) What should be done: short-circuit democracy and impose
a mutualist outcome, or uphold the process of negotiation, debate and democratic
decision-taking and accept an inferior policy?
Or: what if it is in the interest of tomorrow’s citizens to curb the environmental
excesses of today’s - but we are unwilling to give up the comforts
we enjoy? Or: what if a mutualist policy designed to increase social welfare
holds out the hope of large gains for a disadvantaged minority at modest cost
to a (relatively) prosperous majority - and the majority say no?
One answer is to contend that the Government has a duty to assert the
“objective” public interest, and overrule “subjective” resistance. This, however,
runs into huge problems: who defines the “objective” public interest, and on
what basis? Even if robust principles can be set, can ministers and officials be
trusted always to apply them rigorously without bending them to their own
interest and subjective views? Merely to ask the question is to make an democrat
queasy about the answer. Yet there are times when unfettered democracy
does not work either - when a majority tyrannises a minority; or when the
views of a local majority conflict with those of the wider policy of which it is
part.
No tidy, all-purpose solution is available to solve such conundrums, any
more than there is a simple way forward for a company in which workers and
managers are at each other’s throats. When process and outcome conflict,
any institution faces trouble. One of the starkest examples of this - and one of
the most telling arguments for mutualism - is provided by Northern Ireland. For
half a century, its Protestant majority discriminated against is Catholic minority.
Majoritarian democracy did not bring peace and harmony - and nor did a
quarter-century of direct rules, which sought to impose a “fair” settlement.
Peace only came (if it has now finally come) when most people in both
communities, and their political leaders, committed themselves in the Good
Friday agreement to an agreed set of both processes (pursuit of objectives by
democratic means, referendum, voting system for the new Northern Ireland
assembly etc.) and outcomes (such as power-sharing, North-South co-operation,
equal civil, social and economic rights for people in both communities).
And one crucial element in reaching the Good Friday agreement was the slow,
awkward but necessary development of reciprocated trust among the participants.
At the time of writing, that development remains far from complete, and
may be reversed. Meanwhile, Northern Ireland’s recent history present a dramatic
example of the consequences of the different “solutions” to the prisoner’s
dilemma, and of the superior virtues of reciprocated trust over bitter suspicion.
It is, perhaps, novel for Ulster to be presented as a trail-blazer for the
rest of British politics. Yet is does offer us a glimpse of the power of mutualism
- of “the doctrine that individual and collective well-being is obtainable only
by mutual dependence”. It also shows that such dependence requires
engagement with both process and outcomes, and with culture as well as
rules.
Outside Ulster, how close does the present government come to the
tenets of New Mutualism? In some big ways - welfare reform, public health,
devolution, environmental protection, transport strategy - the ideas that are
being pursued fit mutualist principles far more closely than those of old left
socialism or new right free-market capitalism. In other areas - such as taxation,
open government, trade union rights, competition law and corporate governance
- the jury is still out.
New Mutualism, then, seems to be at least a partial description of the
government’s approach to running Britain. This should cause little surprise, for
mutualism is a doctrine that flows naturally from the kind of values that Labour
has always espoused. It is important, however, not to define New Mutualism
as “what New Labour does” (echoing Herbert Morrison’s famously circular definition
of socialism in the late forties of “what a Labour government does”).
New Mutualism is an independent doctrine that should provide the basis
for a coherent and truly radical political programme. In declaring his sympathy
for mutualism in his introduction to this pamphlet, the Prime Minister is 
signalling that the “Third Way” should be not a soft option, but a hard discipline;
and quite right, too.


Case Studies:

Case Study - Employee Owned Business
An Enterprise Approach

The news in March 1992 couldn't have been worse. With £35 million of cuts
required to set a legal budget, the London Borough of Greenwich did as any
responsible Authority would. In order to preserve the essentials,
discretionary leisure services were lined up for a major assault.
But instead of bracing themselves for the redundancies and closures which
had been accepted as inevitable elsewhere, the Members and Officers of the
Leisure Services Department sought a solution which would avoid the closure
of 2 or 3 centres and the loss of up to 30 full time jobs.
They decided to create Greenwich Leisure Ltd (GLL), a 'not-for-profit'
Industrial and Provident Society structured as a workers co-operative, from
the Leisure Services Department. The outcome has been very different from
that experienced elsewhere. Closures have not only been avoided, but
services expanded. Jobs have been protected and enhanced. Democracy has
been introduced.
Costs to the Council have been reduced on an annual basis. From 1992 to
1998, the cost of providing the leisure centres has been reduced from
£2,497,000 to £1,400,000, a saving of over 40%! This has been achieved by
improved service from the empowered staff, new investment from new sources
of finance and a consequent impressive annual rise in income. The Society
has won a Charter Mark and numerous other external quality awards as well
as achieving Investors In People status for internal excellence. More than
50,000 residents have joined the Greenwich Card membership scheme which is
promoted on its behalf by GLL.
Staff feel a real sense of ownership of their business. Their enthusiasm
has led to lower absentee rates, lower staff turnover and a real boost in
morale. Employee pride means that ownership of problems is also improved,
ensuring a responsive customer service.
The business is now free of local government bureaucracy and capital
controls, has a positive cash flow and has reduced costs to Council tax
payers in Greenwich. The new structure allows greater customer involvement
in the service and the opportunity for further community and business
partnerships. A truly mutual outcome.



Case Study - Building Societies
Showing How Mutuals Act Mutually

It is a remarkable fact that in 1997 and again in 1998, members of the
Nationwide Building Society voted against the offer of £2,000 cash in
return for their rights as members of a mutual society.
There is of course a sound financial reason for this. As the Chairman of
the Building Societies Commission explained, "As Mutual Societies do not
have to pay dividends to external shareholders, they will always have a
margin advantage over banks." This advantage allows them to offer cheaper
mortgages and savings accounts that pay more interest on average. The
Consumers' Association found that over a range of financial products, the
typical building society customer is nearly £1,600 better off over a five
year period than with a bank. The difference between the interest building
societies receive on mortgages and that which they pay out on savings
ranges from 1.2 to 1.7 per cent. The equivalent margin from their
demutualised rivals ranges from 1.9 to 2.5 per cent. The Consumers'
Association found (April 1998) that small regional societies had a 0.2 to
0.3 per cent mortgage interest rate advantage over the banks over the last
couple of years (and improving), equivalent to hundreds of pounds a year
for many borrowers. Only the two large high street building societies which
have retained their mutual status, Nationwide and Bradford and Bingley, can
match the smaller mutuals.
But the Nationwide Board's campaign on mutuality was also a significant
factor in the membership vote. Members know that their Society is a truly
prudential organisation. Building Societies were established to provide
savings and loan facilities for individuals otherwise excluded from the
housing market. Over decades, they have built up cash reserves to ensure
that members continue to benefit from the mutual security inherentin this
system.
This large scale positive vote in favour of the benefits of mutuality is a
testament to the value and confidence that customers will place in mutually
controlled businesses.



Case Study - Housing Co-operatives
Taking Mutual Responsibility

Housing Co-operatives provide an opportunity for individuals to take mutual
responsibility for tackling their own housing need.
Homes For Change, Hulme, Manchester was the winner of Royal Institute of
British Architects Housing Design Award 1997 for a Completed Scheme.
"Homes for Change is one of the largest new-build housing co-operative
developments in the north-west to have taken place in recent years. The
scheme, which opened in September 1996 includes 50 flats managed by Homes
for Change Housing co-operative and 1,600ms of workspace managed by Work
for Change, a workspace co-operative. This is the first part of a two phase
development and plans are currently being completed for a further 25 flats
and 400m2 of workspace. It is part of the redevelopment of Hulme and was
developed over ten years by Hulme residents. The building's radical
architecture, participative design process and environmental features are a
physical embodiment of the character of the community that created it."
('Co-operative Housing - Realising the Potential' UKCC 1998 p46.)
In 1995, a Price Waterhouse study for the Department of the Environment
concluded that co-operatives "are a flexible model capable of delivering
housing services which compare with the very best mainstream providers."
('Tenants in Control: an evaluation of tenant-led housing management
organisation'. Price Waterhouse for the DOE 1995 p125.)
The study also found that tenant management co-operatives (TMCs) in local
authority stock produce longer term savings and benefits, which more than
outweigh set up costs; and they can fare better than other forms of housing
management on residents' perceptions of the incidence of crime and
vandalism. The study records that in one TMC 68% of tenants considered
vandalism had declined; 22% of comparator tenants felt this to be the case;
50% that muggings had declined compared with 10 % of comparator tenants
(Tenants in Control p29). And the tenants themselves, through the training
and job opportunities created, gain skills and confidence beyond their
previous expectations.
This added value of personal and social benefits is a key consideration in
any regeneration strategy.



Case Study: United States drugs manufacturer
Doing well by doing good

As long ago as 1943, Johnson & Johnson, the American-owned manufacturer of
health-care products ranging from drugs to Band-Aid, published a "credo"
that put customers first, employees second, the community third and
shareholders fourth. At the time the company was still run by the Johnson
family, and could set its priorities without fearing a backlash from
external shareholders. However, the credo has survived Johnson & Johnson's
growth into one of the world's largest health-care companies, worth $100bn,
employing 91,000 people and operating in 175 countries throughout the world.
Johnson & Johnson's Credo
1. We believe our first responsibility is to the doctors, nurses and
patients, to mothers and fathers and all others who use our products and
services. In meeting their needs everything we must do must be of high
quality. We must constantly strive to reduce our costs in order to maintain
reasonable prices. Customers' orders must be serviced promptly and
accurately. Our suppliers and distributors must have an opportunity to make
a fair profit.
2. We are responsible to our employees, the men and women who work with us
throughout the world. Everyone must be considered as an individual. We must
respect their dignity and recognise their merit. They must have a sense of
security in their jobs. Compensation must be fair and adequate, and working
conditions clean, orderly and safe. We must be mindful of ways to help our
employees fulfil their family responsibilities. Employees must feel free to
make suggestions and complaints. There must be equal opportunity for
employment, development and advancement for those qualified. We must
provide competent management, and their actions must be just and ethical.
3. We are responsible to the communities in which we live and work and to
the world community as well. We must be good citizens - support good works
and charities and bear our fair share of taxes. We must encourage civic
improvements and better health and education. We must maintain in good
order the property we are privileged to use, protecting the environment and
natural resources.
4. Our final responsibility is to our stockholders. Business must make a
sound profit. We must experiment with new ideas. Research must be carried
on, innovative programmes developed and mistakes paid for. New equipment
must be purchased, new facilities provided and new products launched.
Reserves must be created to provide for adverse times. When we operate
according to these principles, the stockholders should realise a fair
return.



Case Study - John Lewis Partnership
More than purely commercial

Undoubtedly one of the most successsful department stores, once thought to
be a dying breed, John Lewis Partnership gives the lie to the bogey of
employee involvement. Not only are the profits from its 23 department
stories, and 117 branches of Waitrose, shared with its 45,300+ staff
(partners), but they are also given a say in how the group is run. Even a
rival department store retailer has said "They've been producing excellent
results for years and years and years. It is a tremendous business: the
brand is so strong their advertising is virtually non-existent".
Managers are accountable to staff, all get a bonus depending on profits
(22% for 1997/98), but basic salaries are below those of other big
retailers. No "fat cat" excesses here. Because staff appreciate that all
can gain, there is a general culture of "not letting the side down", of
maintaining "decency and honesty", of paying suppliers promptly, and making
sure customers are "never knowingly undersold". Decisions to close run down
stores in the past have been tempered and delayed by the need to avert job
losses in the belief that the loyalty and commitment generated produces a
long-term return. Consequently John Lewis suffers lower levels of staff
turnover and staff theft, and enjoys a high degree of customer confidence.
The partnership was set up over 70 years ago when the owner, John Spedan
Lewis, handed over the company to a trust for its employees. He wrote "The
Partnership's supreme purpose is to secure the fairest possible sharing by
all its members of the advantages of ownership - gain, knowledge and
power... It is intended only for those who to be really happy need to feel
they are giving good service to the general community and whom its
character and methods suit well enough in all other ways."
Today, the group continues to combine high-sounding principles with
commercial success. In terms of performance, for 1997/98 the group realised
record profits of 9% after taxation and Partnership bonus distribution. For
the current half year the estimate for sales as a whole is for an increase
of 5% on 1997/98.



Case Study - Retail Chain
Green policies are good for business

B&Q, the UK's largest hardware and do-it-yourself retail chain, has decided
that, from the end of 1999, it will buy timber only from independently
certified sources. This policy is designed to help the world's forests, by
ensuring that no timber bought by B&Q results from harmful deforestation.
It is part of a strategy to persuade the company's suppliers to adopt
environmentally-friendly practices. In 1993 B&Q stopped buying any mahogany
from Brazil.
Following criticism in 1990 from Friends of the Earth, B&Q initiated a
Supplier Environmental Audit (or SEA). It found that fewer than half its
suppliers had any kind of pro-environmental policy, and only 8 per cent had
a policy that "demonstrated understanding and commitment". As a result, B&Q
investigated each of its suppliers and awarded it a ranking from A
(excellent) to F (fail). In December 1993 only 35 per cent were rated C or
above. The remaining companies were warned that B&Q would stop buying from
them if they did not achieve a C rating, or better, by the end of 1994. All
bar 6 per cent of suppliers reached this target; ten companies were
delisted; another 19 were given a final chance to reach C grade, and did
so.
In 1995 B&Q merged its quality and environmental departments, and
established a ten-point "QUEST" code for its suppliers (QUEST: "The QUality
of a product includes its Ethics and SafeTy"). Five of the ten points cover
environmental issues, the other five quality issues. The company has now
insisted that all suppliers achieve a B rating by the end of 1999.
B&Q's strategy shows that even without legislation, it is possible for a
large company in a highly competitive market to adopt tough pro-environment
policies, induce similar policies among its suppliers, and still prosper.



Case study - The Co-operative Bank
Profits through Principles

In 1998 the Co-operative Bank sought to reconnect itself with mutual values
by developing a new mission statement applying co-operative principles to
the modern world of financial services.
The Bank's Ethical Policy had already been operating since 1992, following
a major consultation exercise to find out what customers felt about how the
Bank should invest their money - and how it shouldn't.
All new business customer applications are screened against a strict set of
ethical criteria, with complex decisions referred to an Ethical Policy
Unit. Out of the companies referred to the Unit, 23% have been found to
fall short of customers' standards. In some of these cases, the Bank has
been able to help the customer in question to resolve the conflict with the
policy and come on board. Turning away business is never easy, but under
the Ethical Policy, that is precisely what the Bank has done whenever it
has come across a customer unable or unwilling to comply with it.
In 1997 the Bank launched its Partnership Approach to business, identifying
seven partners who are crucial to its business success. These partners are
Shareholders; Customers; Staff and their families; Suppliers; Local
Community; National and International Society; Past and Future Generations
of Co-operators. It polled 1.2 million customer households to determine
their support for the Bank's new definition of its responsibilities.
100,000 customers responded with 97% backing the Partnership Approach.
This year the Bank published its "warts and all" Partnership Report which
assesses how it delivers value to these seven groups. It also assesses
whether value has been met in a socially responsible and ecologically
sustainable manner.
Far from having an adverse effect on profits, this policy has seen the Bank
enjoy rising profits over the last four years, culminating in a record
£55million this year. The Bank also makes positive cash contributions to
enterprises and organisations whose activities reflect the concerns and
wishes of customers, ensuring as many mutual outcomes as possible in an
unlikely industry.



Case Study: Multinational energy company
Developing an ethical strategy

Shell Transport and Trading is one of the world's largest multinational
companies. Its record is strewn with controversy - from helping Rhodesia's
illegal white regime obtain oil in the Sixties and Seventies in defiance of
United Nations sanctions, to its operations in recent years in Nigeria. It
also faced criticism from Greenpeace and other environmental groups over
its plans to dispose of the Brent Spar oil platform at sea. At its 1997
annual general meeting, 10 per cent of shareholders supported a critical
resolution that called for rigorous implementation, and the external
auditing, of effective "environmental and corporate responsibility
policies". The resolution was put forward by Pensions and Investment
Research Consultants (PIRC), which had been set up in the Eighties by a
consortium of public sector pension funds.
Although PIRC's resolution was defeated, Shell has now addressed each of
its demands. It has published a revised Statement of Business Principles
which incorporate a commitment to sustainable development and human rights.
It has named the chairman of Shell's Committee of Managing Directors as
responsible for group-wide environmental performance. It has set out a
timetable for external verification of its environmental claims. It has
reduced its stake in Nigeria. It has consulted with Amnesty International
on how to reconcile human rights with business strategy. It has left the
"Global Climate Coalition" in the US - an organisation that lobbies on
behalf of the energy industry against curbs on carbon consumption. In
contrast with most of the energy industry, Shell now accepts "the
possibility that human activities are causing damaging climate changeŠ we
support precautionary measures" (Mark Moody Stuart, Shell's Chairman, in
Profits and Principles - does there have to be a choice? April 1998). Shell
has committed an initial £500 million to investment in establishing a new
"core business" in renewal energy.
IRC's verdict is that "Shell has made significant changes on environmental
and corporate responsibility which deserve to be welcomed by shareholdersŠ
We consider that Shell has, in a relatively short period of time, moved, as
the resolution requested, 'to the head of the movement for corporate
responsibility'." (PIRC analysis of Shell's 1998 accounts, April 1998).



Case Study: Privatised utility
Rising to the "Third Way" challenge

In the early Nineties, British Gas was one of the companies most tarnished
by the "fat cats" controversy over executive pay. One of its successor
companies, BG plc, is seeking a fresh reputation, as a company committed to
the quest for a "Third Way" approach to the role of the company in modern
society. In July 1998 John Wybrew, BG's Executive Director responsible for
corporate affairs, delivered a speech on "The 'Third Way' - a Business
Perspective". These are extracts.
 "For the first part of my business career our mental picture of the
business organisation was machine-like and physical. This was the era of
mass production, and huge production lines. People served the machine, and
were often slaves to it in monotonous, soul-destroying jobsŠ
"We now regard the business organisation as an organism, as a flexible
network of units linked together. We see the internal networks - the core
of business - connected in a myriad of external relationships to other
networks, to suppliers, to sub-suppliers, to partners, to customers - and
to society at large. Our paradigm no longer relates to physics but to
biologyŠ Our perspective has become holistic. We recognise a richness of
relationships and inter-dependencies, and a responsibility for managing
them to mutual advantageŠ
"We need to recognise that the first stage of the information economy is
already being superseded. In the next stage - the so-called 'connected
economy' - the enormous power of IT and telecommunications will
increasingly be used to connect up all the elements of business and societyŠ
"Leading businesses are now recognising that the key word is not costs but
value. Of course, efficiency and cost competitiveness are essential
pre-requisites, but they are not the basis for lasting success. Now the
task is to create value - innovatively, and ingeniously in a host of
mutually beneficial relationships with those in the surrounding business
environment: partners, customers [and] the public at large, not least the
excludedŠThis suggests that there is an underlying business reality to the
idea of a 'third way' - Tony Blair's vision of a vigorous enterprise
economy in which economic and social wellbeing are inseparable."



Case Study - Co-operative Wholesale Society (CWS)
A Responsible Retailer

CWS Retail's 'Responsible Retailing' policy is a modern expression of the
principles set out by the founders of the modern Co-operative Movement.
A Gallup survey carried out on CWS's behalf in 1995 sought to judge the
public mood on ethical issues such as animal welfare, the environment, care
for the community, product labelling and human rights. It showed that
customers are ready and willing to penalise retailers and products which
fail to meet their ethical standards, and reward those that do. The survey
findings revealed a public conviction that retailers and manufacturers are
not giving customers the full facts about the goods and services they
provide. While customers are anxious to use their spending power
responsibly, they do not believe that retailers are on their side - and are
wary of environmental and ethical claims made by the food industry to the
contrary.
In response, the CWS since 1995 has introduced new policies in the
following areas:

Labelling
Clear and Honest Labelling - CWS identifies 'tricks of the trade' which are
used to make products sound bigger and better than they really are,
producing a code of practice and calling for the industry to adhere to it

Animal Welfare
CWS launches 'Ending the Pain' - a campaign against animal testing in the
toiletries industry

Fair Trade
CWS commits to joining the Ethical Trading Initiative (ETI),building
partnerships to improve conditions of workers worldwide
CWS 99 Tea Brand becomes the first mainstream food product to incorporate
ethical sourcing criteria

Diet & Health
CWS leads the industry by providing sensible drinking advice on its wines
and spirits
CWS is the first retailer to announce a ban on the sale of 'alcopops' 	in
its stores

Having suffered from the poor image of 'the Co-op' and lost market share to
the likes of Tesco, Sainsbury, Safeway and Asda, CWS is still the market
leader in convenience stores (often in remote areas) and responsible
retailing is leading to increased sales. Take-up of their Dividend Card now
stands at about one and three-quarter million, and rising. Now, CWS is an
organisation at the heart of the UK Co-operative Movement with sales of
more than £3 billion. Owner of The Co-operative Bank and the Co-operative
Insurance Society, CWS is the largest Co-operative retailer in Europe, the
UK's largest farmer and employs nearly 40,000 people.



Case Study - Credit Unions
Tackling Economic Exclusion

A credit union is a loans and savings co-operative. People get together and
save together; their savings provide the basis for loans to members at a
very low rate of interest. Each member is able to play a full and equal
part in the running of the credit union.
Credit unions are important because they encourage savings even of very
small amounts on a regular basis. They can provide low cost finance to
people who do not have access to traditional banks or would not be
considered loan-worthy. They provide an opportunity for such economically
excluded citizens to save and borrow in an affordable way.
The Credit Union movement started in Germany in the 1840s. World-wide there
are over 87,000 credit unions and related societies. In Ireland, one in
four people are members of a credit union. Today, there are 213,366 members
of 585 credit unions in the UK (excluding Northern Ireland), with growing
assets, totalling c£116,900,000 (August 1997 figures).
- In London, a council employee credit union set up in 1984 in Southwark
now has some 1,800 members with assets and shares in excess of £1,600,000.
- Speke Credit Union in Liverpool (a community credit union), after a slow
start in 1989, took over the building of the last bank (TSB) in the area
two years ago and now boasts over 1,500 members, rising by 50 a month, and
a turnover of about £250,000. The default rate is just 5%. They have
succeeded in attracting European Objective 1 money to fund skills training
for jobs in computers, book-keeping, marketing etc for their volunteers.
- Voyager Credit Union, Manchester, was registered in 1992 and now has
3,000 members in 15 different bus companies. With current loans of around
£2.5 million and savings about the same they expect a turnover in excess of
£8 million this year. The default rate is just under 1%.
Credit unions are the fastest growing of all the co-operative sectors and
significant players in regeneration.