Wednesday, July 02, 2008

John Redwood, coal and co-operatives

I had a bit of a debate with Chris Dillow (a lot of my posts at the moment seem to involve responding to Chris, this might continue while Comment is Free is on an even weaker than usual streak) a while back about large firms, co-operatives and the divide between them. There are two points he made that I meant to respond to:

"It is true that big firms are typically publically quoted. But this is because they have huge capital requirements which can only be met by external shareholders. But these are only a minority of all firms."

Absolutely. My argument is that the questions of whether a firm should be owned by workers and whether they should be run by managers have more than one right answer. Big firms with senior managers are not inherently irrational and the products of egos and ideologies, as Chris has sometimes implied.


"And what Matthew hasn't done is successfully controvert the idea that public services - schools and hospitals - should become some type of co-operative organizations."

That's the last thing I'd want to do. Schools, in particular, seem fine candidates to be operated as co-operatives (with a relatively low capital requirement). I don't think I'm the only right-winger who is quite willing to endorse the co-operative model when it seems successful, here's John Redwood writing today on the coal industry:

"Some looked nostalgically back to the age of the nationalised industry, without any great belief that the present Labour government would want to revisit that approach. It is curious how nationalisation still has a grip on their hearts, when the nationalised industry under governments of both parties so let down the mining communities. The 1970s Labour government was in the business of closing mines and sacking miners, just as the subsequent Conservative government was. Each of those governments did so on the advice and at the command of the nationalised industry, which systematically failed to make mining economic enough to sustain a decent sized industry in the UK.

The miners of Tower Colliery proved the Coal Board wrong when they took over their mine and worked it profitably when the Coal Board management had wanted to close it on the grounds that it was uneconomic. Why would we want to go back to management like that? Isn’t the future a more mechanised, safer industry where those who mine the coal share in the profits?"

The question of how a firm should be organised, not to mention why they exist in the first place, is interesting and the answer varies with circumstances. Firms are organised in different ways in response to differing technologies, resource endowments, capital requirements, labour markets, consumer tastes and government regulations - among other things. The best instincts of an economic liberal scream at them to love the sheer variety of it all.


Anonymous said...

I don't think I've ever believed co-ops suitable for all businesses. But, oddly, the example you give of Tower colliery suggests they might be. If coops work in businesses with high capital-labour ratios, where wouldn't they work?
Maybe I've been too moderate...

Matthew Sinclair said...

Just typing while I think, but might profit sharing be important to counteract the demotivating factor of physical danger?