British Labor Party Conference: Models of public ownership

by Michael Roberts

I have just attended a special conference called by the British Labour Party to discuss models of public ownership.  The aim of the conference was to develop ideas on how a Labour government can build the public sector if it came into office at the next general election.



The centrepiece of the conference was a report commissioned by the Labour leadership and published last autumn called Alternative Models of Ownership (with the word ‘public’ strangely omitted).

Labour’s finance spokesman, John McDonnell (and ‘self-confessed’ Marxist) presented the key ideas in the report which had been compiled by a range of academic experts, including Andrew Cumbers of Glasgow University, who has written extensively on the issue of public ownership.  And Cat Hobbs of Weownit gave a compelling account of  the failures and waste of past privatisations.

In many ways, McDonnell’s speech was inspiring in that the next Labour government under Jeremy Corbyn and McDonnell  is genuinely dedicated to restoring properly-funded and resourced public services and reversing past privatisations of key economic sectors made by previous Conservative and Labour governments in the neoliberal period of the 30 years before the Great Recession.

McDonnell and the report emphasised a range of models for future publicly owned assets and services: from cooperatives, municipal services and the nationalisation of key sectors like health, education and utilities like water, energy and transport – the so-called ‘natural monopolies’.

As the report makes abundantly clear, the privatisations of the last 30 years have clearly failed even in their own professed objectives: more efficiency and higher productivity, more competition and greater equality.  It has been the complete opposite.  UK productivity growth has slumped, and, as many studies have shown (see my recent post), privatised industries have not been more efficient at all.

They have merely been entities designed to make a quick profit for shareholders at the expense of investment, customer services and workers’ conditions (pensions, wages and workload).  Indeed, the theme of privatised water, energy, rail and post in the UK has been ‘short-termism’ ie boost share prices, pay executives big bonuses and pay out huge dividends instead of investing for the long-term in a social plan for all.

State-owned industry is actually a successful economic model even in predominantly capitalist economies.  The Labour report cites the fact that the share of state enterprises in the top 500 international companies has risen from 9% in 2005 to 23% in 2015 (although this is mainly the result of the rise of Chinese state companies).  The history of East Asian economies’ success was partly the result of state-directed and owned sectors that modernised, invested and protected against US multinationals (although it was also the availability of cheap labour, suppressed workers’rights and the adoption of foreign technology).

As many authors, such as Mariana Mazzacuto have shown, state funding and research has been vital to development of major capitalist firms.  State owned industry and economic growth often go together – and Labour’s report cites “the seldom-discussed European success story is Austria, which achieved the second highest level of economic growth (after Japan) between 1945 and 1987 with the highest state-owned share of the economy in the OECD.” (Hu Chang).

The report also makes it clear that there should be no return to old models of nationalisation that were adopted after second world war.  They were state industries designed mainly to modernise the economy and provide basic industries to subsidise the capitalist sector.  There was no democracy and no input from workers or even government in the state enterprises and certainly no integration into any wider plan for investment or social need.  This was so-called ‘Morrisonian model’ named after right-wing Labour leader Herbert Morrison, who oversaw the post-war UK nationalisations.

The report cites alternative examples of democratically accountable state enterprise systems. There is the Norwegian Statoil model where one-third of the board is elected by employees; or even more to the point, the immediate French electricity and gas sector where the boards of the state companies were “made up of four appointees from the state, four from technical and expert groups (including two to represent the consumer interest and four trade union representatives.” (B Bliss).

All this was very positive news and it was clear that the audience of Labour Party activists was enthused and ready to implement an “irreversible change towards worker-run public services.”  (McDonnell).  The aim of the Labour leaders is to reverse previous privatisations, end the iniquities of so-called private-public partnership funding; reverse the out-sourcing of public services to private contractors and take the market out of the National Health Service etc.  That is excellent, as is their willingness to consider, not just the faulty idea of a Universal Basic Income (UBI) as a social alternative to job losses from future automation, but also the much more progressive idea of Universal Basic Services, where public services like health, social care, education, transport and communications are provided free at the point of use – what we economists called ‘public goods’.

However, the issues for me remain the ones that I first raised in considering ‘Corbynomics’ back when Jeremy Corbyn first won the leadership of the Labour Party in 2015.  If public ownership is confined to just the so-called natural monopolies or utilities and is not extended to the banks and financial sector and to key strategic industries (the ‘commanding heights’ of the economy), capitalism will continue to predominate in investment and employment and the law of value and markets will still rule.  Labour’s plan for a state investment bank and state-induced or run investment spending would add about 1-2% to total investment to GDP in the UK.  But the capitalist sector invests nearer 12-15% and would remain dominant through its banks, pharma, aerospace, tech and business service conglomerates.

There was no talk of taking over these sectors at the conference.  That was not even talk of taking over the big five banks – something I have raised before in this blog and helped to write a study, on behalf of the Fire Brigades Union (and which is formally British Trade Union Congress policy).  Without control of finance and the strategic sectors of the British economy, a Labour government will either be frustrated in its attempts to improve the lot of “the many not the few” (Labour’s slogan), or worse, face the impact of another global recession without any protection from the vicissitudes of the market and the law of value.