Making the mutual state

The New Economics Foundation is influencing the government’s agenda with its ideas for democratising the public sector. MATTHEW BROWN spoke to NEF’s executive director, Ed Mayo.

Last year an “independent think tank”, the New Economics Foundation (NEF), published a small pocket book called The Mutual State: How local communities can run public services, which argued that “a new vision for government” is needed, “based not on serving citizens, but on co-operating with them”.

“The idea is simple,” write the book’s authors Ed Mayo and Henrietta Moore. “Citizens, on their own or coming together at a neighbourhood or some other level, play a key role in the design and delivery of public services.” The notion of a mutual state, they write, “draws on a long history of mutual approaches that enlist people as partners rather than users”. But this would be a new form of mutuality “focused on participation and social entrepreneurship rather than conventional ownership”.

Potentially, the idea of a co-operatively run, participatory public sector has some fairly radical implications, in some respects chiming with the ILP’s emerging notions about radical democracy as the engine of democratic socialist renewal. What’s more, the fact that the NEF has at least some of the ears of government (Trade and Industry Secretary Patricia Hewitt wrote the foreword to The Mutual State, for example) suggests that their ideas are worth examining, if not necessarily accepting uncritically.

Ed Mayo is the NEF’s executive director. “The real paradox of public ownership in the way it has developed here is that the public don’t have a sense of ownership at all,” he says. “So the state has become a collectivist intermediary, delivering public goods on behalf of people. That’s a perfectly fine model, it’s a model that says disinterested neutral professionals are the best way to deliver services to people in need. But there is another model that says you engage those people in need as active agents and partners in the process.”

The “paternalistic model” of the welfare state that we’ve lived with for the best part of 60 years and more, is under pressure from two sides, he says – “globalisation”, on the one hand; and “the failure of state-led services” to preserve people’s dignity and avoid stigmatising service users on the other. “We’ve developed the work around the mutual state really as an alternative to globalisation,” says Mayo. “We see it as a way to democratise the state and bring the public back into public services, before the state goes down the corrosive route of privatisation.”

This is clearly a very real threat. In fact, Mayo’s prognosis is that we’ve been living through “an era of soft globalisation” and that things are going to get “tougher and nastier” in the near future. Mayo himself originally worked in the private sector, with Andersen Consulting (auditors to Enron, and all that), before his interest in development economics led him to the World Development Movement, for three years, and then to the New Economics Foundation.

Alternative economics

The NEF emerged from an initiative called The Other Economic Summit in the mid-1980s, which started to generate alternative ideas to those espoused by world leaders who gathered at G7 and G8 meetings. “The NEF was really set up to explore alternative economics,” explains Mayo. “What would a just and sustainable economy look like and how would you get there? It emerged from an understanding that inequality and environmental degradation stemmed from, not just economic practices, but also the kind of framework and theory that lay behind them.”

With its roots in the first anti-globalisation summit, NEF sought to get beyond a merely oppositional stance. “We accept the critique of globalisation and environmental degradation,” says Mayo. “But our focus is on ‘what are the alternatives?’”

NEF describes itself, not just as a think tank, but as a “think-and-do tank”. It helped to set up campaigns such as Jubilee 2000 and the Ethical Trading Initiative, and to establish social and environmental audits of corporate behaviour as an accepted, mainstream practice. With initiatives on everything from climate change to fuel poverty, community development and corporate accountability, it is now both well established and well respected. Indeed, it was described in the Economist as “the most innovative and eclectic think tank in the field today”.

Obviously, it would never use the word socialist (such words are not part of modern political parlance), but when it describes itself, in last year’s annual report, as “working for a new model of wealth creation, based on equality, diversity and economic sustainability”, it is clearly an organisation socialists should know about.

Its work, it says, is divided into four “essential components”: new community, work, democracy and global economy. Encouragingly, it understands democracy in a broad sense, encompassing social and economic dimensions as well political. In fact, the aim of extending democracy is a central theme of The Mutual State.

“It’s so easy to make economic growth look good, if you disenfranchise the poor and ignore environmental externalities,” says Mayo. “Mutuality is at the core of a growing movement that’s often called the social economy which is showing how you can run an economy in an inclusive and sustainable way.”

A third wave

In The Mutual State, he and Henrietta Moore, Professor of Social Anthropology at the LSE, argue that a new mutualism has emerged over the last 20 to 30 years, manifest in initiatives such as fair trade, ethical investment and micro-credit. They describe this as the “third wave” of mutualism. The first, dating from the sixth century to the 16th, was about providing mutual aid through craft guilds and the like; while the second, stretching from the 16th century to the 20th, was based on common ownership and gave rise to the co-operative movement.

The third is primarily about participation, and has emerged through the growth of credit unions, housing coops, farmers’ markets, community shops, and so on. Mayo and Moore claim these “social enterprises” grew by nine per cent between 2000 and 2001; that care and worker coops increased by 52 per cent, and tenant-owned housing organisations by a third. Such organisations, says Mayo, are “the seeds of a better future”. “They are forms of experimentation that have touched every part of the economy, in terms of new ways of looking at models of ownership, consumption, trade and investment.”

This new mutualism, he says, is growing, not only in response to globalisation – “which represents the triumph of the market and of the market ethic of self-interest” – but also as a reaction to the failures of the three traditional “social” sectors, namely the state, the voluntary sector and the co-operative sector.

“In my view those sectors have got to ditch their differences pretty quickly,” says Mayo. “The state is in danger of being co-opted by market forces and the private sector. The co-operative movement is still, often, a backward-looking movement that is exclusive. And the voluntary sector focuses on alleviating the problems caused by society, but not really doing anything to transform the situation.”

Modern mutualism is “wider than a narrow co-operative definition of common ownership”, he says, which is based on “a 19th century model of alternative economics”, namely the labour theory of value. “There’s no serious radical economist now arguing in favour of a labour theory of value,” claims Mayo. “They’re arguing for recognition of different types of capital – social capital, environmental capital – and different ways of looking at resources. Radical economic theory has moved on, and the models we have for enterprise and wealth creation can move with it.”

New mutuality, then, is not simply about ownership, “as important as that is”, it’s also, particularly, about participation.

However, if mutuals are “a way to democratise the state”, and “participation is key”, how do you motivate what’s commonly regarded as an apathetic, overworked and/or disengaged public to take responsibility for services they have come to expect to be provided for them? Indeed, some argue that the most successful mutuals, such as community credit unions, for example, emerge only out of economic necessity, that it’s only when people’s backs are to the wall that they begin to act, and act collectively. And rarely then.

Mayo’s answer is two-fold. First, he says it’s “a myth” that people aren’t engaged in public services already – the NHS relies on 170,000 volunteers, for example. Secondly, public service reform is happening anyway, and in a way that’s “actively placing responsibility back on individuals”. In many areas, like pensions, this has not been a pretty process. Nevertheless, as people get used to the idea that the state will no longer “provide for all”, they will get involved “where there is decision making”, as has happened with youth offending panels, he claims.


In truth, Mayo’s attitude is not nearly as glib as this may sound, for he recognises the need for government incentives, for new ways of valuing people’s contributions and time, and for people to be trained and educated in the skills necessary to run co-operatives and mutual services. He recognises, too, that if mutuals are to be more than just another way of managing the public sector, and play a role in transforming and democratising civil society, then there needs to be a degree of political education, of politicisation. And for that, the input of the labour movement is important.

“There is a strong history of mutuality on the left,” he says. “So it’s partly a matter of rediscovering it.” But there’s also a strong tendency towards central control, a tendency that all but killed off the co-operative roots of the movement itself. “There is this tremendous paradox that the Labour Party is the party of the workers, but it has this incredibly managerialist streak,” says Mayo.

The NEF has been advising the Department of Health on how to set up foundation hospitals – the locally-controlled, semi-independent units which will be available to the “best performing” NHS Trusts under the new health reforms – and Mayo is clearly excited at their influence. “The Secretary of State has basically taken up our recommendations,” he says. Not surprisingly, then, he is equally agitated by the opposition of such Labour figures as Roy Hattersley and Frank Dobson to the ideas.

“Their real complaint is a managerialist complaint: ‘We can sort out the NHS from the centre, why on earth would you want to give more powers locally?’. The most difficult thing to get anyone to do is to let go, especially politicians.”

These hospitals will be non-profit, social enterprises, structured on the principle of “democratic accountability through multiple stakeholders”. This notion of multi-stakeholders is key, he says, to the new mutuals’ capacity for avoiding some of the problems associated with the mutual movements of the past – exclusivity, managerialism, divisions between workers and users, the disengagement of members from the purpose of the organisation.

“Many voluntary and co-operative organisations still have single stakeholders,” he says. “Instead of shareholders being in charge, they’ve got workers in charge. Or instead of workers in charge, they’ve got consumers in charge. The idea of a multi-stakeholder model is you’re bringing together the different stakeholders engaged in an enterprise and allowing them a democratic say and involvement in the organisation.”

This is what makes them accountable, says Mayo, and accountability is vital to their success. “Accountability is what holds mutual organisations, what keeps them going in the right kind of way. It plays the role that competition plays in the market, if you like.”

Mayo concedes that one type of organisation is not going to be appropriate in all cases – that “you have to do different things in different ways at different levels of scale”; and that, without “a lock on assets”, there’s always a risk mutuals can become Trojan horses for the private sector. “If you’re going to go down a process of mutualisation, you’ve got to get it right,” he says. “You’re setting a kind of DNA which will carry public services through for quite some time. So if you don’t have a cast iron guarantee of democracy within that DNA in some way, then it might unravel further down the line.”

What’s more, while the government is interested in mutualisation in some areas, like health reforms and transport, it hasn’t made it “the central theme”. “They are still very open to and interested in privatisation, and private finance,” he warns.

Befitting its “do-tank” tag, Mayo and his cohorts at the NEF didn’t settle with the publication of the booklet last year, but immediately established a project to see how the ideas in The Mutual State could be fleshed out. Together with the Co-op Party’s “not-for-profit think tank”, called Mutuo, they set up a website where participants could share their experiences of mutuals and examine how they could work in public services. In the report of those debates, Building the Mutual State, published in May this year, contributors discuss different models for mutualisation and look at mutuals which already operate in some areas of the public sector.

The NEF has even developed a “mutual state toolkit” to be applied across a range of public services, and a “mutuality test” to determine the kind and level of mutualisation appropriate in different areas of the public sector. “One motto for public service reform in the 21st century is going to be, not ‘rolling back the state’, but ‘rolling forward the community’,” concludes the report.

Whether their ideas and, more importantly, the government’s reforms will lead to real community empowerment and an extension of democracy, is open to debate. Yet, clearly, as far as Ed Mayo and the NEF is concerned, these are ideas whose time has come.

The Mutual State: How local communities can run public services, and Building the Mutual State: findings from the virtual think tank, both by Ed Mayo and Henrietta Moore, are available from the New Economics Foundation, tel. 020 7089 2800, e-mail, or go to


A third way?

The central argument of The Mutual State is that “mutualisation” offers a solution to the battle over public services between “the post-war tradition of state-owned, state-run services” and privatisation, subjecting services to market forces.

Mutuality, claim Ed Mayo and Henrietta Moore, predates the modern public, private and charitable sectors by almost a thousand years and, in modern form, can “re-energise public services”. Mutual services would be run “with the close co-operation or control of key stakeholders”; involve users in their delivery, so be “more efficient and responsive”; and could stimulate “wide-ranging and participatory civic renewal”.

It draws on examples of successful mutual organisations which have grown over the last two decades. “Social enterprises succeed because they build a long-term business with a clear focus on the good of their community,” they write. “Their mutuality is about participation rather than a narrow model of co-operative ownership.”

Mutualisation should include five key elements:

  • a participation audit by a community participation unit in the Cabinet Office
  • a decentralisation of services, in particular, recasting local authorities as “smaller, strategic units” to oversee local services, build the “capacity” of local citizens to run services mutually, and to give public institutions, such as schools, greater autonomy
  • a recognised status for mutuals, including a legal framework for social enterprises
  • a “migration” of selected services to the new mutual status
  • a “re-imagined state” as a guarantor, funder and regulator of mutual public services.

Mayo and Moore argue that “a practical programme of mutualisation” could begin with services that have “clearly failed” – schools, hospitals, and housing – while care for the elderly, childcare, employment advice, parks and libraries, leisure, recycling, youth justice and regeneration partnerships are also priorities.


1 Comment

  1. Autumn 2002 - ILP
    22 October 2010

    […] Will Brown calls for the left to re-examine its knee-jerk responses to international conflict. Making the mutual state The New Economics Foundation is influencing the government’s agenda with its ideas for […]

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