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Kitty in chains - By Kitty Miv, Editor

Kitty Miv, Editor
19 January, 2012

Elderly warhorses abound on the European stage this week, from the venerable Tobin pantomime animal, currently starring in President Sarkozy's re-election campaign at the Palace Theatre, and shortly thereafter destined for the knacker's yard, to the more sprightly, even perhaps immortal Employee Share Ownership steed.

Immortal, because it is such a virtuous idea that no-one would ever condemn it to be chopped up. But fated to be eternally unfulfilled, because while it is indisputably admirable, it is so contrary to the interests of the main vested interests that run our societies that it stands no chance of thoroughgoing adoption.

This week the UK is having one of its periodic flings with 'worker capitalism', quite a revealing name for it, since Workers and Capitalists, to give them their Marxist-Leninist capital letters, both hate it. To see why, look at the reasons that Australia gave when it backed off any enlargement of its current puny share ownership regime when it gave the idea a long, hard look a couple of years ago.

'Capitalists', meaning the providers of capital, are variously, investment funds, insurance companies, private equity funds, stock exchanges, and wealthy individual investors. What they all want, with minor differences, is a liquid market where merger and acquisition activity is well-oiled and not held back by spiky groups of shareholders with interests which are at variance with their own. It's obvious that they will be against employee shareholders; or to put it the other way about, no group of employee shareholders is ever going to be in favour of unbridled, short-termist market activity.

What about the Workers, then? Wouldn't they be in favour of taking some ownership in the businesses where they work?

Sorry, but no! The Workers means the Unions, and they are right against employee shareholders. It's probably too obvious to need explaining, but you have to start from the unpleasant fact that Union bosses are no Kier Hardies; they are corporatist fat cats with high salaries, luxurious offices, unlimited expense accounts and unfettered powers. For them, the best place for workers to be is in chains, and they cooperate willingly with bosses to make sure things stay that way.

But wouldn't the Government be in favour? After all, it's undeniable that businesses with employee shareholders are more successful, make more money, pay their staff better - and all of that means more tax. Well, sorry to disappoint you, but it doesn't work that way. True, there are some shining examples of mutual businesses, such as John Lewis (they're always mentioned, because they're just about the only one!), where the whole business is employee-owned. But the more normal scenario is for the share-owning managers of a partly employee-owned business to want to be self-employed, and if anything is anathema to tax collectors in general, it's self-employment. Just like the funds, the bosses and the Unions, the tax collectors want you chained up.

The reasons for this are to be found in employment law, which for all its recent liberalization by the EU is still basically a slaves' charter. When you start to draft a service contract for one share-owning employee, or a group of them (I've done it) you quickly come face to face with the impossibility, from the employee's perspective, of having a business relationship with your employer alongside your employment. So, you ask, and are advised, to seek self-employment, so that you can have an actionable contract with your boss. Which she wants, unless she is unusually enlightened, about as much as she wants to eat nuclear waste for breakfast.

Thus even well-intentioned governments end up by crafting toothless group share ownership regimes, and ducking the changes which would actually create a true entrepreneurial culture.

So it's employment that's the problem; the convenient set of chains lovingly crafted in the 18th and 19th centuries by the powers-that-were and their lawyers, and which no government ever since has had the remotest intention of removing.

There are some chinks of light to be seen in the growth of home-working and tele-commuting; but that's all they are. A truly radical government would invent a new form of company/worker relationship over the heads of the vested interests, suited to democratic capitalism, light the blue touch-paper, and stand well back.

I'll volunteer to draft the law; but no-one will call me!

Ciao, Kitty


About the Author

Kitty Miv, Editor

Kitty was born in Argentina in 1960 to a Scottish cattle rancher and his Argentine wife. Educated in Edinburgh and at Princeton, Kitty worked for the World Bank as an economist, where she met and married an emigre Iranian banker. During her time with the Bank, Kitty worked in a number of emerging markets, including a spell in the ex-USSR as a Transition Economies Team Leader. Kitty is now a consultant in Brussels and has free-lance writing relationships with a number of prominent economic publications. kitty@lowtax.net


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