Bartek Staniszewski is a researcher at Bright Blue.
There is a long tradition in English-speaking democracies to see property as a wellspring of liberty. This idea is often attributed to the early twentieth-century MP Noel Skelton, but the intuition behind it is much older than that. Psalm 128 tells us, “You shall eat the fruit of your labour; happiness and prosperity shall be yours.” John Locke, writing in the seventeenth century, tells us that, just as God has rights over us, having created us, we have rights over the fruits of our own labour. And in the 1840s, this same idea was exemplified by the Rochdale Society of Equitable Pioneers; the first co-operative.
In 1840s Rochdale, ten miles outside of Manchester, the average life expectancy was only 21 years. Determined to make the best of their lot, a small group of tradesmen registered a society, selling various food items and tobacco. The profits made by the Society were distributed to the Society’s members and said members were given democratic control over the Society’s proceedings.
The principles of the Rochdale Society are still with us today. There are over 7,000 co-operatives in the UK today, and over three million worldwide. There are also over 1,400 employee-owned businesses where employees control their business as shareholders.
Co-operatives and employee-owned businesses are often referred to, together, as mutuals, but even non-mutual businesses often exemplify the principles of the Rochdale Society. Community businesses, such as community-owned pubs, provide the locals with a stake in their area, while if you work for a large business, you might get to have your say – to more or less effect – at regular general meetings.
Adopting the Rochdale Society’s principles has substantial national, local, and individual benefits, which are covered extensively in Bright Blue’s most recent report, Mind your business? Expanding democratic business in the UK.
First, this kind of business is far more productive than its rivals. Mutuals are, on average, as much as 12 per cent more productive than non-mutuals and are over 50 per cent more likely to invest more in R&D.
Second, because they do not have to maximise the short-term profits of external shareholders, businesses that follow the principles of the Rochdale Society are far more resilient. Co-operatives were four times less likely to cease trading during the COVID-19 pandemic than their non-co-operative rivals and co-operative start-ups continue to trade in over 80 per cent of cases five years after they are set up. This is as compared to only under 40 per cent for non-co-operative start-ups.
Third, the money distributed by mutuals is much more likely to go to those who need it. As such, mutuals have a strong levelling-up effect in places where they are present. Take the example of John Lewis, which is owned by its employees. Yearly, John Lewis distributes a dividend of around £200 million to about 80,000 employees, each of whom earns an average wage of £25,000. By comparison, the similarly-sized Marks and Spencer distributes its dividend mostly to financial institutions, such as Schroeder and Blackrock. Not only do the employees of John Lewis need the money more, they will also spend it more wisely – for example, on consumer goods, instead of on speculative investments that inflate property prices.
And fourth, businesses that follow the principles of the Rochdale Society give legitimacy to the system we live in. Take it from Ronald Reagan:
“Their employees have a stake in the place where they work and a stake in the freedom of their country.”
Indeed, Reagan was very optimistic about the future of mutuals, and employee-owned business in particular. In the same speech, he said, “In the future, we will see in … the Western world an increasing trend to the next logical step: employee ownership. It is a path that benefits a free people.”
Today, levels of trust in the system in this country are poor, and they are getting worse. Young people are the most likely to be unsupportive of democracy: over 65s are twice as likely to support democracy as 18 to 24-year-olds. Young people are also roughly three times more likely to want military rule, or rule by dictate, and this support is stronger among those with worse socio-economic security – they want to tear down the system that has betrayed them.
At such a time, the ability to have a financial stake in your workplace or your local area will motivate people to preserve those places instead of tear them down in a misguided revolutionary zeal to burn the world and rebuild on its ashes. The underlying concerns of those who do want to get rid of ‘the system’ need to be addressed. Many people feel that their lives are being influenced by powerful businesses with their own agendas and that this power of influence is one they do not deserve. If people could instead influence the businesses they work for, or shop at, themselves they could effect the change they want to see without tearing things down.
Many places around the world already have enacted policies to help facilitate the creation and work of mutuals and other democratic businesses. Most European countries, for instance, mandate employee representation on company boards. The UK, however, never implemented any legislation in this regard, despite the suggestion having been once made by the then-Prime Minister Theresa May. And while tax incentives to promote employee control over the businesses that employ them already do exist, much more can be done.
In our new report, Bright Blue propose ten different policies to promote these kinds of businesses in the UK. Democratic businesses can play a major role in the levelling up agenda, whoever ends up in power, giving local communities control over their economy. To not recognise this would be a missed opportunity.