The Labour Party’s Inclusive Ownership Fund Is a Good Idea


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John McDonnell of the UK Labour Party just unveiled a policy that would require large corporations to gradually place 10 percent of their equity into an Inclusive Ownership Fund (IOF) owned by workers. The IOF is a form of funds socialism similar to the 1980s Meidner plan in Sweden and the social wealth fund proposal published by People’s Policy Project last month.

Under the plan, companies with more than 250 workers would be required to create an IOF for their company and grant that fund 1 percent of their shares every year. Once an IOF reaches a 10 percent equity stake, the annual share grants would stop.

Workers would be able to vote as shareholders in proportion to the shares held in the IOF and would receive dividends from their ownership just like any other shareholder. The dividends would be capped at £500 per year per worker, with the remainder flowing to a separate “social dividend fund” that will provide money for public services and welfare benefits.

Wealth fund plans like the IOF come in a lot of different flavors and have varying ways of organizing the ownership, control, and dividends of the fund.

The American Solidarity Fund that I proposed would organize the fund on the society level, meaning that both the dividends and control would be operated through society-wide institutions.

The initial Meidner plan in Sweden would have organized the funds on the sector level, meaning that there would be a fund for each sector of the economy with each sector fund owned and operated by the workers and unions in that sector. However, the Meidner plan sent the dividends from the sector funds up to a central “clearing fund” rather than paying them out to each sector’s workers.

The IOFs are operated on the firm level, meaning that there is one fund for each firm and the workers in each firm own and control it. The IOF also pays out dividends on the firm level, but only up to £500, with the rest flowing to society as a whole through the aforementioned social dividend fund.

Not surprisingly, I think the American Solidarity Fund design is a technically superior approach to funds socialism than the IOF.

The ASF ensures all workers equally benefit from the country’s capital stock rather than pegging each worker’s benefit to the peculiarities of the firm they happen to work in (how capital-intensive it is, how much of its surplus it reinvests, and so on). The ASF also ensures that nonworkers receive a dividend, which is important since disabled people, students, caregivers, and the unemployed should be included among the collective owners in my opinion. Finally, because the ASF pays out to all (including nonworkers), it does not allow employers to use the existence of the dividends to lower wages. When dividends are tied to the firm you work for, they become part of the pay package of working at that firm, which means you can theoretically use the existence of the £500 dividend to trim wages by a similar amount.

The IOF’s £500 dividend cap cuts down on many of these issues, but not entirely. The dividend cap ensures the inequality in dividend payments between workers won’t be that high and ensures that some of the surplus is returned back to society as a whole, including to nonworkers through welfare benefits and public services. The cap also limits the degree to which employers can substitute dividends for wages, but again not perfectly.

Nonetheless there are many ways to do this sort of thing and the IOF is quite a good idea worth supporting. It provides a practical way of bringing a large chunk of capital under collective control, moving the country down the path towards a genuine democratic socialism.