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Economic COLIC-Cost of Living Crisis - a thematic series

The issue of representation - a note

Hector McNeill1

Although not recognized as a trades union, the Bank of England's track record demonstrates a strong tendency to safeguard the interests of the financial sector and through some miraculous and undefined mechanisms imagines this to be sufficient for ensuring that innovation and real growth can look after themselves. The outcome after 50 years of monetarism is that most now realize this has not worked. All sectors and their associated constituent groups need representation.

This note explains makes some suggestions to help improve the state of affairs.
Representation through unions is a requirement to safeguard wage earner incomes and to terminate the current bias towards the interests of asset holders and traders who seem to have the ear of the Bank of England whose policies seem to be directed to their particular interests.

Because the problems of COLIC are affecting almost everyone the unions have realized that most people do not have the means to communicate their frustration at the next to useless monetary policies in terms of safeguarding wage earner wellbeing.

Unions tend to operate well in large state organizations but there are opportunities to accelerate the growth of representation by embracing the needs of mutuals. Mutuals have lower overheads than plcs which are equivalent to an operational costs reduction of between 11%-15%. Mutual work forces are better represented in terms of decision making on the distribution of revenues between wages and investment because there are normally no external shareholders. In mutuals the objectives of the workforce and off their company tend to be well aligned.

Trades unions could expand rapidly by embracing cooperative and mutual organizations as a means whereby work forces can secure more say over their wage conditions linked to their parallel decisions on investment to enhance productivity. This association of wage settlement and productivity agreements is an essential part of tackling COLIC. However, the notion of representation shifts from being a demand for higher wages to a more constructive procedure of decision analysis of seeing how to improve productivity to seek feasible trajectories for wage increases in the future that do not jeopardize the viability of organizations. So, it would seem that sector planning dominated by work force representation and corporate management can resolve many issues as long as government does not interfere by bad mouthing unions and attempting to restrict their scope and operation. On the other hand, unions need to adopt a constructive engagement with respect to productivity so as to assist organizations maintain levels of productivity to enable them to provide satisfactory wage settlements.

Whether in large or small organizations, mutuals or cooperatives, workplace representation is an essential ingredient to address COLIC. The objective of the Real Incomes Policy (RIP) is to provide the means to adjust productivity and the incentives for companies to lower unit prices with no risk to operational continuity. Schumpeter considered profits to be the guarantee of future operations and employment. This does not mean profits are swallowed up on a constant basis but rather than increasing productivity provides the means of growth in real incomes for all constituents.

The enduring cop out

The degree of prejudice imposed by monetarism is accompanied by an insurance policy to protect politicians from claims for compensation such as the catastrophic impact of widespread house repossessions during the Thatcher government caused by inappropriate monetary policies of high interest rates. This converted perfectly sound mortgages taken out in good faith into sub prime mortgages and an inability of mortgagees to pay their premiums solely as a result of an irresponsible monetary policy decision. The abusive response of politicians is that, if the population is dissatisfied with a government's policies they can vote them out at the next election. This is a complete cop out and avoidance of responsibility for extreme prejudice imposed on constituents. This is an abuse of the principles of democracy and law. To avoid this type of abuse it is essential that all wage-earners have better representation in the workplace so as to have more leverage over policy results in the form of real incomes. The Real Incomes Policy provides such an underlying guarantee against such abuse by providing companies and work forces with a better handle over their operations under a RIP regime which can eliminate the likelihood of any such abuse from political parties. The impact of policy rests in the hands of company management and workforce representation.

An interesting detail is that under RIP the form of corporate organization with the most opportunities to benefit are mutuals and cooperatives.

1  Hector McNeill is director of SEEL-Systems Engineering Economics Lab

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