Tuesday, 21 June 2022

Railway Strike: confrontation, not co-operation

The railway strike which begins today invites comparison with the 1970s. This is not, however, everyone's view, for reasons this constructive article by Will Hutton makes clear.

Whether or not these comparisons with the 70s are valid, what is clear is that we have learned so little in the last half century.  Britain's basic problem, than and still now, is that both our political and our economic institutions are organised to promote  confrontation rather than co-operation.

In our politics, our "winner takes all" electoral system  narrows our choice to two major sides, which sit opposite each other in parliament, jeer at each other and try to impress their sporters by acting tough.  Confrontation rather  than co-operation results.  This was damaging enough when the  winners' arrogance was tempered by deference to the largely unwritten rules of the "good chap theory of government."  Now that these conventions are routinely ignored by the present government, or, if they are written, torn up and re-written to suit the present incumbents, we are staggering further and further away from the  true democracy of which we are pioneers, and which, among other things, assumes the rule of law and respect for the views of minorities.

The same confrontational structure dominates our economy.  Put at its simplest, private company boards represent solely the shareholders, and have  the legal duty to maximise their profits.  Excluded from formal representation, workers band together in trade unions and unite to try to achieve better wages and conditions.

When I first campaigned as a Liberal way back in the 1960s we proposed new structures in both politics and economics in order to replace competition with co-operation.  In politics we proposed that our parliaments  should be chosen using an electoral system based on proportional representation achieved by single transferable votes in multimember constituencies..

 To promote co-operation in industry (and there still was lots of it) we  argued that company boards should, broadly speaking, represent not just the shareholders, but also the employees and some form of community representation. Each should have one third of the seats so that, crudely, neither owners nor employees  could have it "all their own way" but would need to gain the support of some of another group,  or maybe both of them, for their ideas to be implemented.

 This, of course, made little progress, though some companies, such as the John lewis Partnership, have adopted the allied idea of profit sharing with great success, and similar structures exist in the Scandinavian countries, Germany and France, all of which now have higher levels of productivity and standards of living than the UK.  

The present rail confrontation illustrates the weakness of the government's position.  It is a nonsense to claim that the issues are for the management and unions to sort out for themselves.  Of course the government has a stake and should exercise it.  After all, railways are a public service and are heavily subsidised from the public purse. 

The managements have the genuine case that railway usage now, party as a result of the increase in home working, has reached only 80% of its pre-pandemic level, and adjustments need to be made.  The unions argue that their members  have kept the service running in the dangerous times of the pandemic, their wages have remained static and need to reflect the present levels of inflation, and that adjustments should not involve compulsory redundancies reduce safety levels

The government, representing society, should be involved so that a suitable compromise is reached.

Instead of acting constructively in this way, one suspects that Prime Minister Johnson is delighted  to have a "national emergency" which takes attention away from Partygate and the shambolic performance  of his government, and the official opposition is terrified of any move which might enable the right wing press to identify it as on the side of the workers.

Both our political and economic structures need urgent reform.  Instead we are still trapped in the confrontational grooves which existed fifty years ago.  We have learned nothing and, sadly, there is little sign that serious ideas about reform are anywhere near the surface of current political discussion.


10 comments:

  1. Co-operation in industry is a terrible idea, because it basically means you end up with a cosy little deal between worker and producers and you know who loses out in that scenario?

    That's right, only the most important people of all: the consumers!

    Without competition, there is no incentive for producers to keep prices low, so they charge consumers more and more, paying themselves and their workers greater and greater amounts for doing less and less.

    Without competition, there is no incentive to maintain the quality of goods, so they get shoddier and shoddier as workers know they will keep baing paid more and more no matter how much attention they pay to their work.

    Without competition, there is no incentive to provide good service, so it becomes ever-more impossible to find anyone who can deal with a problem as they roll in late and knock off early, knowing their jobs are secure because — there being no competition — where else can people turn?

    Remember what the man said: 'Consumption is the sole end and purpose of all production; and the interest of the producer ought to be attended to only so far as it may be necessary for promoting that of the consumer.'

    After all, railways are a public service and are heavily subsidised from the public purse.

    Yes, that is an error.

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  2. The comment is by Peter Wrigley. Anonymous, please read the post again. The aim is to promote co-operation within the organisation: that the different "stakeholders" within the organisation co-operate rather than fight fight each other for a greater share of the "spoils." There is nothing to stop competition with other organisations. Where appropriate this would be encouraged. Of course customers should be involved: they would form party of the "community" representation along with others affected by the existence of the organisation.

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    1. The aim is to promote co-operation within the organisation: that the different "stakeholders" within the organisation co-operate rather than fight fight each other for a greater share of the "spoils."

      Yes, I know that. But when they co-operate, who loses out? The customer.

      Let's take just one example: one of the things that keeps costs down for the customer is lower wages. How are wages kept low? By competition within the labour market: if employees ask for too much they can be replaced, or better yet, not hired in the first place in favour of someone asking for less.

      But if the different 'stakeholders' co-operate, then those pressures don't exist. Employees ask for wage rises and, instead of pointing out that there are ten people who could do their job just as well queueing up for it so why don't they take their demand and shove it, or else quit and try their luck on the market, they give in. And the wage bill rises and the costs go up.

      'Ah,' you might say, 'but there's still competition between suppliers for customers, and that will keep prices down!'

      Which would be true, if companies were free to chose for themselves whether to go this stupid 'co-operation' route or not. In that case the companies which went the co-operation route would have higher costs, the ones which maintained labour competition and so had lower costs would undercut them, the co-operative ones would eithe rhave higher prices so no one would buy form them so they would go out of business, or they would compete on price but with their higher costs they would lose money and go out of business. Either way the co-operative firms would be driven out of business by the more efficient, competitive firms, and all would be well with the world.

      If that's what you were suggesting I would be fine with that: the market would make sure everything worked out in the end by sending the co-operative firms to the wall. but I got the impression you were suggesting that firms be forced to adopt co-operative structures in some way. In which case there will be no opportunity for more competitively-run companies to undercut their bloated, co-operative competitors, because all would be forced to bear the surplus costs of co-operation. So all prices will rise.

      And who loses out in that scenario? That's right: consumers! The only people in the whole system who actually matter! The only people who whose benefit the whole thing exists!

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  3. You seem unable to distinguish between co-operation within an organisation and competition between organisations. The former can happily compete with other organisations whether the others are co-operative or not. If they get things badly wrong they will go out of business. The existence of third "stakeholder " group, which would include consumers, is to ensure a balance between shareholders and employees. They will want to get things right and maintain a profitable business which produces a sound and competitively priced product which treats its employees fairly. The John Lewis Partnership seems to do very nicely, as do many other co-operative organisations.

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    1. You seem unable to distinguish between co-operation within an organisation and competition between organisations

      Because there is no such distinction. The most fundamental truth of economics — that a free market matching supply and demand through price signals is the most efficient way to allocate resources — doesn't suddenly magically stop working just because the resource in question is, say, people's labour.

      So inasmuch as 'co-operation within an organisation' interferes with the operation of the free market in labour, it must by necessity lead to inefficiencies, and those must end up impacting consumers because consumers are at the end of the chain.

      The existence of third "stakeholder " group, which would include consumers, is to ensure a balance between shareholders and employees

      But why would consumers need to be a 'stakeholder' group? Consumers already exercise ultimate, absolute power over producers, because it is their purchasing decisions which determine which producers survive and which don't. As long as governments don't reduce that power by interfering in, eg, the free labour market, then there is no need for consumers to have any kind of role as a 'stakeholder group': consumers can just continue to do as they currently do and, through their revealled preferences, they will 'get things right' by ensuring that the businesses which best fulfil their needs out-compete the ones which don't.

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    2. For instance, imagine there are two supermarkets, A and B. Supermarket A does lots of community outreach, funds local charities, pays its employees really well, and so on and so forth. Supermarket B doesn't bother with any of that stuff, pays rock-bottom wages, and as a result is able to keep its prices lower and undercuts A at every opportunity.

      Why do consumers need to be a 'stakeholder group' in order to decide which of these approaches they prefer? As long as there's a fair market they will decide by their individual decisions to shop at one or the other which one deserves to survive and which one should go bust (or, seeing which way the wind is blowing, change to be more like the other in order to compete better with it). I can't see how being a 'stakeholder group' could give them more power than that, because that power is already pretty absolute.

      [Of course in reality consumers are not uniform and probably both supermarkets will end up catering to different niches, but that in itself shows a more efficient allocation of resources as it means that customers who care about price can get the lowest prices rather than being forced to fund stuff they don't care about, while consumers who do want to pay for all that guff can do so.]

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    3. Or if you want another concrete example, imagine a technology is invented which would allow workers to be twice as productive, meaning that after the initial investment a company could lay off half its workforce. Clearly this would benefit consumers, as it would result in lower prices, but equally clearly any 'co-operative' company would never be able to simply made half its workforce redundant overnight.

      This example isn't entirely hypothetical either; to bring it back to the original example of the railway strikes, trains currently run with at least twice the crew that is actually necessary, mainly due to the bargaining power of the unions. If they were run properly — ie, competitively — driver and guard numbers would be slashed, with the ensuing benefits for travellers of cheaper tickets. But because they are run co-operatively, due to the power of the unions, this doesn't happen, twice as many people as are actually needed are employed, and passengers, and the taxpayer, have to pay far more than they should do.

      Hopefully these strikes will make people see sense and properly invest in the technologies which will allow the train companies to radically downsize their workforce.

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  4. Try asking public transport users, but or train, why they need representation. They'll tell you.

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    1. Try asking public transport users, but or train, why they need representation. They'll tell you.

      they only need representation because the government subsidises train and bus companies, thus insulating them from the effects of their customers switching away from them to other modes of transport, such as cars.

      If the government were to stop subsidising rail and bus companies, and instead let them go bust if they don't up their customer-service game sufficiently to attract people to use their services rather than driving, then they'd start listening to their customers and improving their service pretty damn sharpish.

      So you rather make my point for me: the way to get good service is through the open market, which ensures that companies which provide a god service survive and those which don't, don't. Problems only occur when the government steps in to subsidise unprofitable businesses — like train and bus companies — and therefore makes it so that they don't have to provide a good service because they will get paid their subsidies anyway.

      They solution isn't more 'representation' by focus group, it's to remove the subsidies and that will force the train and bus companies to up their game or their will go bust.

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    2. (On a topical note, removing their subsidies might even force them to stand up to the unions, invest in technological solutions which allow them to run trains with less staff, and then pass the savings on to their customers in the form of lower fares — something we can all agree would be a good thing, but which train companies have no incentive to do so long as they know that the government will always, eventually, bail them out with public money, which is to say, your money and my money, if they give in to the unions' demands.)

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