Clegg Stuck on the Capitalist Fence*

As we seek to find an alternative to the discredited corporate capitalist model of enterprise it is vital that we understand clearly the range of options on offer, which is why Nick Clegg's confusing statement about the John Lewis economy is particularly unhelpful.

John Lewis is a company without shareholders, whose value is vested in a Trust and can only be shared between the company's employees. This is quite distinct from a standard corporation which allows its employees to buy some of its shares while its management is free to inflate profits by risky endeavours or extract value in bonuses. While John Lewis employees receive a share of the profits they generate, employees of share ownership schemes might find, like the employees of Enron, that they lose not only the value they created but also their jobs and their pensions.

Understandably, those who currently profit from others' work via their share ownership are nervous about the suggestions that workers might keep all the value of their work themselves. The response to Nick Clegg's speech from the Financial Times includes the expression of these views from the side of capital, skilfully woven in with the completely distinct anxieties expressed by Charlie Mayfield, chair of the John Lewis partnership.

Unsurpsrisingly, most of the discussion entirely avoids considering the option of a full-scale co-operative business, where risks and rewards are shared between those who work in the business, who are also its owners. The suggestion that workers might own and control their workplaces is part of the real alternative that may not be articulated. Whether we look to the Basque Mondragon Group or our own Suma Wholefoods co-operative we see a model that is stable, sustainable and just: a model that could form the basis for a national economy we could all buy into.

*An edited version of this letter was published in today's Guardian.
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Mortgaging our future; stealing our assets

Financial engineering is a phrase that has become part of our normal vocabulary when thinking about the 2008 crash and its aftermath. Like genetic engineering, which implies that the botchery of implanting crocus genes into rice is akin to building the Clifton Suspension Bridge, the phrase is unduly respectful towards the City whizz-kids. Financial fraud is obviously closer to the truth.

It is worrying, therefore, that so many of the cabinet have a background in the financial world and owe their exalted status to its riches. And more worrying that the techniques they learned there are creeping into policy-making at local and national levels. The offending item of policy is what is being called 'tax increment financing' - a piece of misleading spin typical of the 'financial engineers' who brought us credit-default swaps and leverage.

At the Lib Dem conference Clegg claimed that tax increment financing was ‘the first step to breathing life back into our greatest cities’. It is hard to see how shifting debt from central to local government is breathing life. At a time where debts are in the process of destroying what we have come to think of as civilisation it seems more like the kiss of death.

The theory is that public infrastructure can be funded through borrowing, which will be repaid as a result of extra taxes that will be generated because this infrastructure, say a road, will encourage the development of more property, say another supermarket. This is using financial engineering to engineer economic growth and forcing the pace of development. It is also putting local taxpayers at the mercy of developers, since infrastructure (like roads) that would serve their interests will find funding, whereas infrastructure that will not (say, a care home for elderly people) will not.

The word from the Treasury is that tax increment financing would operate within a ‘carefully designed framework of rules, which the Government will work closely with local authorities to design’. The nature of liabilities and the assignment of collateral will be key here. Depending on what the detail says, this could be a way of allowing developers and financiers to take control of local infrastructure and the most important local asset: land. Tweet