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CIRIEC in Antwerp – more theory than policy 6 November 2013

Posted by cooperatoby in EU, social economy, Social enterprise.
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CIMG1196-7 BoerentorenSocial Economy on the Move, the CIRIEC conference in Antwerp two weeks ago, was the first academic conference on the social economy that I’ve ever been to. Given that it was so close I couldn’t really say no – especially with €10 ‘Web Deal’ train fares on offer.
But I confess I was a little disappointed. The organisers had given space to as many promising young researchers as they could – the 48 workshop sessions each dealt with between 3 and five papers – and this meant that they each had very little time to play with. Anxious to prove their academic credentials, they tended to use most of their 15 minutes of fame to set out the theoretical model they were applying, and had no time to talk about the real world to which it referred. So not only was there no way to verify the truth of their assumptions and deductions, but I learnt very little about the state of the social economy in the wide world.
Of course the corridors and Oxford-style quadrangle of the Hof van Liere – you should not ignore the mediaeval heart of Antwerp if you have the chance to visit – did provide a place to bump into old friends and colleagues.
Thus, the main value I got from the event was the plenary sessions, held in the Boerentoren or ‘Farmer’s Tower’ – a miniature Empire State Building which was Europe’s first skyscraper, and has now passed from CERA to KBC, my bank.

Positive social value, but market regulation

On the bright side, the Belgian state certainly sees the value of the social economy. Yasmine Kherbache from the cabinet of Prime Minister Elio di Rupo reassured us that it was a misconception that policy to support the social economy has more costs than revenue – it’s just that the benefits are hard to measure in strict economic terms. She also stressed that the social economy’s role is growing: the present economic model cannot last till the next generation as it cannot cope with the issues of demographic change and the environment. “We can only progress if everyone can follow”, she said. She sees the sector’s growing relevance, noting how second-hand shops (kringloopwinkels) have been transformed from being the preserve of the poor into a resource for sustainability for everyone.
Getting down to brass tacks, she went on to justify the controversial Flemish maatwerkregeling (‘made-to-measure regulation’) which reallocates work integration subsidies according to each individual’s distance from the labour market. This reform has caused concern among WISEs in Flanders, as it makes their budget unpredictable and their financial planning very difficult. Not only that, but it puts social and conventional enterprises on the same footing. The subsidy is portable, and the worker carries it in a ‘rucksack’ if he or she changes jobs (although apparently the social economy and economic affairs ‘rucksacks’ will be different beasts, which might limit mobility).

Trust in globalised markets

Avner ben Ner from the University of Minnesota looked at how the globalisation of the supply chain is affecting the social economy.
Globalisation leads to long anonymous supply chains with asymmetric information and social distance. Businesses have greater opportunities to take advantage of this information asymmetry, so the self-regulation which the social economy practices is a valuable asset. It was asymmetric information (in the form of adulterated flour) that led the Rochdale Pioneers to set up shop in 1844. Long supply chains make quality inspection prohibitively expensive, and government regulation is out of fashion. So by quasi-regulating themselves, social economy organisations reduce the damage that globalisation causes.
His conclusions are that the social economy should focus its efforts where success is most likely: on food, on collaborative marketing, on new ways of raising capital (e.g. crowdfunding) and on new technologies.

Co-ops poised to benefit from global trends

According to Ruben Monbaillieu from MacKinsey, co-operatives’ credibility with their members means that are in a good position to benefit from four trends:

  • the rebalancing of the world economy from developed to developing countries
  • the rapidly raising old-age dependency ratio
  • ‘pricing the planet’ – factoring environmental costs into prices
  • the ‘market state’ – governments becoming active in the market

Aspects of management they need to improve are measuring their impacts and the speed with which they react to change.

The social economy as a component of social justice

Philippe van Parijs of UCL in Louvain-la-Neuve situated the social economy in a philosophical perspective. He believes that social justice has there dimensions: equality of opportunity, freedom and efficiency:

  • Equal opportunity means equal concern for the interests of all members of society – but personal responsibility means that it is up to each individual to make the most of the opportunities he or she has;
  • Freedom implies a liberal, pluralist perspective, that respects everybody’s right to seek their own conception of the good life;
  • However efficiency must also be considered: if equality leads to worst outcomes for all members of society, then we should allow injustice.

We need the market to ensure efficiency. The state’s role is to regulate the market, redistribute income and provide services such as education, health, cash transfers, justice and tax. So do we need a third sector?
Luckily the answer is “yes”, because of two characteristics:

  • its ‘marriage of trust and flexibility’
  • its facility for ‘legitimate self-exploitation’ which benefits the public

Non-profit private sector organisations are particularly needed where there is asymmetric information in markets.

Electricity prices – unfair comparisons 18 December 2012

Posted by cooperatoby in Brussels.
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Electricity meterI’ve just learnt a new and total distrust of price comparison sites – Belgian ones anyway. The other week our copropriété decided to switch electricity providers, and Essent looked the best. I typed my private consumption details into Mesfournisseurs.be – and was told that switching to Essent would save me not the 17% I expected but, wait for it, 100% of my bill – yes, my power would be free. I am sceptical it would work out like that in practice.

This morning, stung by an abnormally high Internet bill from EDPnet, I took up their own suggestion and compared prices on besttariff.be. Strangely, whatever probable or improbable usage estimates I key in, it always always recommends Belgacom – and at prices higher than I am currently paying!

There are some rubbish programmers around, hiding behind glitzy web design. It makes (seasonal) mincemeat of information assymmetry being the main barrier to fair markets. Maybe good old fairness – ethical business practices – would work better.

Invest in Luxembourg!

It’s not what you might think. The Lucéole co-operative is inviting subscriptions to invest in a wind farm at Fauvillers in Luxembourg province. it offers an ethical investment at a fair return.

Hidden agendas 27 October 2011

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I’ve just been impressed by the subtle way that journalists influence political debate. On the BBC’s Today programme, Evan Davies has just had a perfectly civilised conversation with Guy Verhofstadt, now an MEP but previously Belgium’s prime minister. How different from last week on Newsnight, where Jeremy Paxman permitted himself to be extremely rude to Mr Verhofstadt. Introducing him casually as “He used to run Belgium,” (my grandmother used to say “She is the cat’s mother”) Paxman went on to ask him whether he would welcome Britain contributing to the euro bailout fund. When Mr Verhofstadt unsurprisingly answered that of course he would welcome it, Paxman then jumped in to deride him with the most extraordinary comment: “Spoken like a loyal Belgian”. This portmanteau combines two insults: to the concept of loyalty as well as to the country of Belgium. He implies that being loyal to Belgium is somehow a bad or ridiculous thing. I don’t think a respected journalist can permit himself to be so high and mighty. No one elected Paxman, and he should remember that. I wonder what clubbable spirit promoted him to be far more courteous to his studio guests, one of whom was the previous editor of the Economist.

Perhaps the difference is in the target audience between Radio 4 and BBC 2 television. Perhaps the difference is that Evan Davies has ventured onto Belgian turf, at the Euro Summit, whereas Paxman was sitting back in the comfort of his own armchair, railing at Mr Verhofstadt, who was imprisoned behind a screen. Perhaps it’s that Paxman is subconsciously promoting his recent book on the British Empire. Perhaps it’s that he is genuinely rattled by the peril that the world’s economic stability is in. At any rate, it shows the British political culture in a bad light, with knockabout journalism uncomfortably close to the real fisticuffs that routinely take place in the Italian parliament.

Robin Hood to the rescue 11 February 2010

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In a stroke of genius, Richard ‘4 Weddings’ Curtis has rechristened the Tobin Tax the “Robin Hood Tax ” and made a 2-minute film starring Bill Nighy to launch it. I heard about it on last night’s PM. It’s such a simple and overdue idea it can’t fail – particularly as Gordon Brown has come out in favour too. The campaign calculates that a 50p per £1,000 levy on all transactions that don’t involve actual consumers – i.e. not only currency exchange but bond speculation – would raise £250bn per year. Brilliant. It will as he says give banks the opportunity to become part of the solution!

There seem to be two main arguments against, and both are paper-thin:

(1) you have to have the whole world on board or else you will scare the “financial services” industry and it will emigrate and take 25% of the UK’s corporation tax revenue with it. Well quite apart from being tempted to say “good riddance” as we all revise down our expectations of a comfortable retirtement, the same argument is used in New York where they say they will come to London! Where are they going to go? We can get an OECD consensus, police our offshore dependencies and if anyone else sticks out – just unplug them from the networks.

(2) it is economically “inefficient”. Well as far as I can see having unemployment and empty property are inefficient too. Capital is just one factor of production like labour, fuel and land. To live in a civilised society you have to raise taxes. The point is to have a fair, workable and robust taxation system that raises reasonable amounts from lots of different sources. There is no special reason to make an exception for financial transactions – indeed on grounds of equity one would first lower taxes on labour (and put them up on carbon).

There’s no alternative to good public sector management 3 July 2009

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Ken Livingston points out a nice irony in today’s Guardian:

“Part of the problem is that civil servants are taken to the cleaners in the construction of the privatisation contracts by the private companies’ sharper legal teams. One of the rationales for the tube’s PPP was that it made no sense to hand billions of pounds of public money for tube upgrades over to London Underground management and civil servants who had such a poor record of delivering. Yet, these same civil servants were left to draw up the detail of the PPP contracts. They were completely turned over by the private sector.”

There are two indissoluble aspects to the solution:
– appoint good public servants, and have faith in them (but have good appraisal and accountability systems too)
– regain a sense of ethics among contractors, who will always be necessary (after all I am one myself, to declare my interest)

Devaluing journalism 6 June 2009

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“A newspaper is a package of content – politics, sport, share prices, weather and so forth – which exists to attract eyeballs to advertisements.” So declaimed one of the Economist‘s leader writers on 16th May. This stunning piece of reductionism is almost enough to make one cancel one’s subscription! Yes, it’s very clever to turn the world upside down – in reality adverts exist only to support editorial – but it is self-contradictory as well as nihilistic. Ironically, the article to which it refers analyses the decline of the “department store” newspaper and the corresponding rise of the specialist news outlet, working on the principle that the smaller the audience for a story, the more willing its readers will be to pay for it. Surely this implies that readers have more choice – and it is certainly not advertisements they are seeking. These are a necessary evil, and people avoid them where possible, as the continuing primacy of the BBC shows. People need a meaning, and papers need a purpose and a set of principles. Readers are much more interested in the values that their reading matter embodies than the Economist admits. The Economist itself was founded to promote free trade, and it can’t do it by denying its own values.

Public and private ethics 17 May 2009

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Hurray for Steven Fry who puts the witch-hunt in perspective by reminding us that it is not only MPs who readily get used to over-generous expenses regimes – or ones that are under-enforced, according to Menzies Campbell.

Why the extreme public anger? Joe Public clearly blames not the system, but the individuals. But why pick out politicians above journalists, business people – or even European bureaucrats and consultants? What seems to put MPs in the hot seat is two things: first they are their own judge and jury, and secondly it is public money they have been so spectacularly absorbing.

The solution on the system side would seem to be to install checks and balances – a genuinely independent external auditor, not a toothless commissioner answerable to those very people he or she is meant to be policing. The rules need to strike the right balance between compensating for different needs (where judgement is involved) and the simplicity of flat-rate allowances.

As for the individuals, should they resign – or be sacked? True that MPs are in a particularly exposed position when it comes to charges of hypocrisy, as it is their job to set the rules for other people’s behaviour.

But this shouldn’t blind us to the broader case for honesty. What Steven Fry has done is remind us that we need to be honest when it’s private money that’s at stake, not just public money. Our own karma is on the line when we steal, but society as a whole is diminished too. After all, distorted incentives and a sense of being an unpunishable elite in the private sector is what has given us the financial crisis and bank collapses.

It’s another piece of evidence in favour of a value-led approach to business, as exemplified by the social economy!

Perverse incentives 17 May 2009

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The BBC World Service today reported research done by Duke University in the USA, which shows that higher incentives lead to worse, not better, performance. The experimenters took three groups of people and offered them a reward for performing a task well. The first group was offered a day’s pay, the second two weeks’ pay, and the lucky third group six months’ pay (they carried put the experiment in rural India, where they could afford it). The findings are totally counter-intuitive, at least to today’s economists. While there was no difference between the two less-incentivised groups, the third, golden-handcuffed group, scored not better, but worse!
Why should that be? The research leader theorises that two effects are at work: an incentive effect makes people want to perform better – but a countervailing stress effect means that when so much is at stake, people can’t focus on the task at hand at all! Good to know we are on the way to understanding that the intrinsic value of the job is more important than the reward.

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