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The lessons of the Bullock Commission on Industrial Relations

Leo Pollak

The current vogue for examining and exalting the German social market model of capitalism is at once understandable and overdue. Growth has been restored and employment retained in Germany following the 2008-9 downturn whereas the UK economy has flat-lined and unemployment spiked; the former's GDP is 1.1 per cent above its pre-crisis level, ours remains 1.4 per cent below (ONS, FSO). It has become tempting to ask why we can't have what they have. 'Why can't the UK have universal banks supervising and investing in the productive economy, alongside local county banks that embed capital locally to meet a given community's economic needs?' 'Why doesn't the UK have an intensive large-scale apprenticeship system, providing the patient nurture of future skills in careful co-ordination with industry?' 'Why can't the UK have institutions that save redundancy and later rehiring costs by protecting employment during a downturn?' The questions multiply - 'why does Germany have three times the number of patent applications as the UK?' 'Why don't we have a respected workforce and collaborative workplaces with board-level representation for employees?' Before wondering too why we don't have an octopus that can correctly predict football results, the attempt to relate these questions to the British context has begun in earnest.

The employee influence that never was

While the UK's advantages are readily identified (its universities, its cultural clout, its finance hub), I would claim that the lazier answer to the Germany question (that of national psyche, 'sobriety in the Rhine') is greatly overstated. Between the post-war commitment to pursuing worker interests through the public ownership of industry, and the Third Way commitment to retaining flexible labour markets while ameliorating the worst excesses of abuse and exploitation, Labour has at several points in its history pursued greater German-style participation rights beyond the traditionally exclusive avenues of centralised state direction and union bargaining (Clift, Gamble and Harris, 2000). Most notable are the Wilson and Callaghan governments' attempts to introduce a stronger form of co-determination (joint employer-employee direction) in British firms than has existed in Germany either before or since. That the commission and report on industrial democracy in 1976-77, chaired by the historian Sir Alan Bullock, was eventually abandoned doesn't lessen its contemporary significance. With the all-party push for a more responsible and accountable capitalism, Labour's call for worker representation on remuneration committees, and wider demands for industrial adjustment and corporate governance reform, it is worthwhile re-examining this fractious period of modern history.

Necessitated by the UK's weakening global trade position, declining industrial coherence, and the new opportunities and obligations that came with membership of the European Community, Harold Wilson sought initially to harmonise UK law with progressive EU draft directives on worker participation in industry. There also existed a movement to capture many of the benefits of intensive employee influence in firm processes, as seen in the booming manufactures of Germany and Japan (Radice, 1974), at a time when British Leyland (caught between the antagonism of intransigent management and unions, grandstanding government, and twitchy shop stewards) notoriously failed to provide even a suggestion box for its plant workers. (Even in today's circular and artificial debate between the high road and low road to wealth-creation, a fig-leaf shaped space is now found for employee empowerment measures within the stubborn frame of flexible, insecure labour practices and tax incentives - as in the Chancellor's tax-exempt shares for rights scheme for small business employees).

Charged with the year-long task of analysing labour relations and corporate governance arrangements at home and across the industrialised world, and with formulating rules for a 'radical extension of industrial democracy', the Bullock Committee's majority report recommended a rough 50:50 split between shareholder and employee votes electing members to a single-tier unitary board (Davies, 1978), thus giving workers in industry a level of influence unimaginable by today's standards of weak and ever more diluted employment rights.

Met by an inevitable backlash from the press and big business, the bill eventually went through no fewer than seven readings and lengthy consultations before a White Paper with widespread City and industry backing finally offered a two-tier 'executive' and 'supervisory' structure (similar to that on the continent), ready to pass into law. At this point, dysfunctional politics came to the fore. Jack Jones, head of the TGWU and an enthusiastic and influential supporter of Bullock, rallied largely reluctant TUC affiliates to the cause, pushing for parity representation of workers to management solely through the trade unions. The GMWU pre-empted the intended culture change by condemning the lack of flexibility in the machinery for joint corporate control. Both Hugh Scanlon of the AUEW and Frank Chapple of the 'right' EETPU found common ground with communist-influenced unions fearing worker input in management would compromise free collective bargaining (Lea and Ackers, 2010). Employment Secretary Edmund Dell condemned the lack of unanimity in the union movement on the single-tier board, while Shirley Williams baulked at the prospect of enshrining union power at all. As Jim Callaghan cogitated lengthily over whether or not to reform other parts of company law, and the pre-SDP Liberals hedged their bets over an early election, the Winter of Discontent arrived and the prospect of industrial democracy sunk down the agenda (Sandbrook, 2012). Then came June 1979, and a generation of trauma and regret, with a cultural transformation culminating in New Labour's early plans for industrial partnership and stakeholder capitalism being shelved for fear of association with 1970s corporatism and industrial unrest. It was a failure of politics that saw Labour squander the opportunity for enhanced employee influence in firms and public institutions, and with it the prospect of a more vocational economy and collaborative workplaces. Before Thatcher's emasculation of union power, or even after the IMF loan and subsequent privatisations of 1978, the failure of Bullock was arguably the key point of divergence in modern British political economy.

When imagining what an alternative trajectory could have looked like, the 'what ifs' parallel the 'why not us' questions. Such reforms towards a collaborative machinery for corporate governance of the firm could have seen the takeover of Cadbury's by Kraft in 2010 blocked from within, much as German firms successfully resisted value-extracting mergers and acquisitions activity during the 1990s and 2000s (Culpepper, 2010). They might have better organised service sector employment, maximising coverage of a minimum living wage, while tempering extortionate and morale-sapping levels of top level pay at several of our largest firms. They may have provided a crucial dimension of accountability in our banks in upholding their lending targets, servicing local economies, and keeping their balance sheets honest. They could have engendered a more vibrant innovation culture within firms, with a wider pool of knowledge contributing to incremental improvements, and with it the possible retention of much of our lost British manufacturing. When the costs of insistent labour-capital antagonism become a heavy burden on all sections of society, as they arguably are today, the 'what ifs' and 'why nots' form a more pressing question - 'what can we learn?'

The lessons of Bullock

Quite apart from the object lesson on the perils of disunity and indecision, of letting the larger picture pale against the 'narcissism of small differences', perhaps the key lesson to draw from the experience of the Bullock Commission is in how very different the party politics, economic imperatives, and industrial relations of today are.

Despite spirited disagreements over the legacy of New Labour and electoral strategy, the party is broadly united, with a revitalised intellectual atmosphere and renewed maturity following the factionalism of the 1970s and turf wars of the Brown- Blair era. When considering the divergent path taken by Germany, the disconcerting image of a political Basil Fawlty screaming 'don't mention the 70s!' is thankfully beginning to fade.

Today too, with on-going deleveraging in bank, household and public sectors set to last for many years to come, the focus on the 'predistribution' side of the equation (Jacob Hacker's term for how the market distributes rewards before the state's taxes and transfers kick in: Hacker, 2011) has increased the likelihood of a more receptive public, at a time when living standards are being squeezed and the incidence of low skill work and low job satisfaction is growing. Moreover, a wealth of management best practice reveals the critical importance of intensive employee influence in forging strong 'communities of shared purpose' and 'innovation democracies' (Hamel, 2007).

As for the trade unions, while the politics of partnership and reform will present unique challenges, a very real case for improved employee protections and living standards, as well as more fulfilling and democratic workplaces, can be made in the context of a narrative around the trade union role in renewing industry and capitalism. A broadening of employee participation and trade union functions can ensure the UK workforce is better placed to respond to a future economic environment characterised by growing global markets for high-value manufactured goods, and a stronger onus on skills advantage amid shifting dynamics of ownership and production along global supply chains. The strength of trade union activity as the true manifestation of the 'Big Society' should also be better acknowledged. It hasn't been the activities of trade unions that contributed to the current crisis of productive under-investment and financial over-leveraging, nor has it been unions holding the democratic will to ransom. Their public status can and should change.

The lessons for British industry, continually pushing for the on-going dilution of employment rights, are many. Enhanced employee influence could correct many of the identified flaws of contemporary corporate governance - from short-term planning to weak innovation cultures, from under-trained and under-respected staff to the lack of protection from 'predatory' capital. Many of the standard-issue complaints we hear from business - from the mismatching of skills to industry, to the difficulty of competing with countries whose industries receive strategic state support - are symptoms of a failure of co-ordination and the scorched earth approach to labour relations. The respective homepages of the CBI (cbi.org.uk) and German equivalent the BDA (bda-online.de) websites bear close comparison. The latter emphasises partnership between finance and industry, employers and employees, new and established workers; the former deepens the suspicion that the CBI is less an industry lobby and more a CEO lobby. The comparatively low take-up of existing participation rights, and the widespread defensiveness of both employers and unions to the 2004 EU Information and Consultation directive (Hall, 2006), is as much a reflection of entrenched positions in the working parts of our economy as of the extent successive British governments have shirked responsibility for a wider framework that better balances competing social and sectoral interests.

The question of how to unpick these mutually-reinforcing zero-sum cultures and aversion to corporate governance reform is the challenge that confronts today's Labour Party. And it is as much a cultural challenge as a political one, spurring a subtle but significant shift in the focus of Labour politics on the economy.

From third way politics to a three way politics

This vital shift in policy and purpose could be characterised as moving from a third way politics to a three way politics. Third way politics concerned that dimension of political economy that saw labour-capital antagonism as detracting from the fundamental job of capital, to mobilise labour, and from the potential of labour to mobilise capital. A model of wealth-creation based on laissez-faire financial regulation and broad managerial prerogatives in industry and public administration resulted in stagnant real wages for the vast majority of the workforce and an explosion of wasteful 'presenteeism' in the workplace. A 'three way' politics by contrast scrutinises the supply-side arrangements of the economy with a newly historically-informed account of the underlying ecology of wealth creation. It would look to strike a mature balance between the three dependent bodies on which all institutions, public or private, depend - that of funders (be it a state agency, a bank, or private investors), users (either as voluntary civic bodies or formal structures providing accountability for the wider community), and employees - and would pursue a tripartite distribution of responsibility and power throughout firms and public institutions where possible and desirable. A 'three way' politics of this kind would be concerned less with how power is distributed through the state (important though this will always be) and more with how it manifests itself within institutions.

The on-going competition between the main parties to diagnose the current crisis of capitalism is a sign of the real flux that exists today in British political economy. While David Cameron's critique of crony capitalism rang hollow, Nick Clegg's commitment to an employee-owned 'John Lewis' economy, for all its familiar liberal shortcomings, is an acknowledgement of how the political terms of trade have altered, as well as of the potential for future common ground. Responsible capitalism is Labour's mission, but has also too often been regarded as Labour's kryptonite. A sober comparison of the context of today with the context of Bullock - the economic imperatives, culture of industrial relations, and the dysfunctionality of union and Labour politics - can be a source of insight and reassurance for our party as it builds towards setting out a more socially balanced and politically co-ordinated economy.

Leo Pollak is a policy researcher and activist, currently establishing a new wage comparison and civic analytics platform at economywide.co.uk.

 

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References

Clift, B., Gamble, A. and Harris, M. (2000) 'The Labour Party and the company', in Parkinson, J. E., Gamble, A. and Kelly, G. (eds.) The Political Economy of the Company, Hart Publishing.

Culpepper, Pepper D. (2010) Quiet Politics and Business Power: Corporate Control in Europe and Japan, Cambridge, CUP.

Davies, P. (1978) 'The Bullock Report and employee participation in corporate planning in the UK', Journal of Comparative Corporate Law and Securities Regulation 1: 245-72.

FSO: German Federal Statistical Office via http://www.tradingeconomics.com.

Hacker, J. (2011) 'The institutional foundations of middle class democracy', London, Policy Network.

Hamel, G. (2007) The Future of Management, Boston, Harvard Business School Press.

Hall, M. (2006) 'A cool response to the ICE Regulations? Employer and trade union approaches to the new legal framework for information and consultation', Industrial Relations Journal 37 (5): 456-72.

Lea, D. and Ackers, P. (2010) 'Democracy in the workplace - the Bullock Report revisited', at http://www.historyandpolicy.org/forums/union/meeting_090710.html.

ONS: UK Office for National Statistics at http://www.ons.gov.uk/ons/index.html.

Radice, G. (1974) Working Power: Policies for Industrial Democracy, London, Fabian Society.

Sandbrook, D. (2012) Seasons in the Sun: The Battle for Britain, 1974-79, London, Allen Lane.

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