- 'Welsh Water gives £27m back to customers' - Guardian headline, 12th June 2008
- (http://www.guardian.co.uk/business/2008/jun/12/utilities.consumeraffairs)
- "The company... is unique among UK utility firms because it has no shareholders and reinvests all its surpluses for hte benefit of Welsh Water's customers." Each customer recieved a £21 dividend this year. totalling £27m. The remaining £14m profit will be taxed and reinvested into the company.
- "The interest we pay on our borrowings is much lower than if we had shareholders" says Nigel Annett, chief exec of Welsh Water. "Unlike other parts of industry, we're looking at a service. We are removed from the profit bit, which gives us a legitimacy with customers. I think it has worked better than we thought it would."
- It has 'no shareholders' but does have investors. "We are regarded as a low risk company because we have removed risks," says Annett. "Our investors want a safe home for their money. Investors charge lower interest. Lower interest means lower bills for customers." "We spent two years in the city of London arguing our case to investors. We had to raise £1.9bn, which I think is still one of the largest corporate bonds ever."
- Welsh Water is owned by Glas Cymru
- http://news.bbc.co.uk/1/hi/wales/1433520.stm
Glas Cymru launched what was described as a "people's bid" back in November 2000, pledging to take over Welsh Water from its present owners - Western Power Distribution - and run it on a non-profit making basis.
Instead of paying dividends to shareholders, cash surpluses would be shared with customers.
The company has promised to reduce water charges for Welsh Water customers, which are among the highest in the UK.
- Instead of shareholders the company will be controlled by a group of 200 or so members - led by some some prominent names from the business world.
The purchase price - nearly £2bn - would come from selling bonds in the City of London.
Welsh Water, which supplies water and sewage services to nearly 3m people, was part of the Hyder group which fell victim to a hostile takeover by the US company Western.
Welsh Assembly First Minister Rhodri Morgan welcomed the news of the go-ahead.
"I particularly welcome the prospect of Welsh Water being owned once again by a company based, managed and controlled from Wales, based on a principle originated in Wales," he said.
Glas Cymru is a single purpose company formed to own, finance and manage Welsh Water. It is a ‘company limited by guarantee’ and because it has no shareholders, any financial surpluses are retained for the benefit of Welsh Water’s customers.
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Kennedy 1995
Makes some interesting claims with no discussion of sources or methodology (and as a result I do not trust this source)
Interesting claims:
Figure 3 – p 23 – proportion of cost that is interest payments:
• Garbage collection fees: 12%
• Drinking water costs – example of a northern German water supply works, 1981 – 38%
• Use of drains / Sewage costs – example of the city of AAchedn, 1983: 47%
• Cost of rent in public housing: calculations of the German Federal Office of Statistics, 1979: 77%
“On an average we pay about 50% capital costs in the price of our goods and services. Therefore, if we could abolish interest and replace it with another mechanism to keep money in circulation, most of us could either be twice as rich or work half of the time to keep the same standard of living as we have now.” P25
- very sketchy calculations – the number is probably inaccurate but the argument is interesting.
Dieter Suhr argues that the money system is a government service (is it??) – and therefore it works against the constitutional rights of the individual in most countries, for 10% of the people continually receive more than they pay for that service at the expense of 80% of the people who receive less than they pay for.
She presents the graph shown in Lietaer but does not reference is properly. She says the figures are from Helmut Crutz. I am in email trail for full reference details.
margritkennedy@monneta.org, Helmut.Creutz@iit-online.de
Alternative argument:
- companies create employment, pay taxes, through section 106 contracts give back to the community. Building societies don't give loans to poor people.
http://tutor2u.net/economics/content/topics/marketsinaction/producer_surplus.htm
http://en.wikipedia.org/wiki/Consumer_surplus
The producer surplus is the amount that producers benefit by selling at a market price that is higher than they would be willing to sell for.
So, it could be that:
companies are aiming to maximise producer surplus. This raises prices and the demands on the consumer, or, increases the flow of capital (financial, human, social) from the consumer to the company.
So, for the money project, we'll need to understand theories of pricing
If part of the argument is that excessive profit leads to excessive/problematic transference of human and social capital from the consumer to the shareholder via the company (money transferred below the line of producer surplus is not transferred to the shareholder because it is contributing to the costs of production, which is necessary) - then that debate will need to sit in the language of price, consumer and producer surplus.
A key question is how do you meet the need for fairness and for an organisation's need to make hay while the sun shines? That need seems fair and acceptable. How do we define when profit accumulation goes beyond acceptable haymaking?
What is the relationship between the ownership debate and the profit debate? They are separate yet related. For example, a co-operative could still make large profits and maximise capital transfer from consumer to shareholder.
In Adam Smith's capitalism, competition is what prevents producer surplus from becoming unacceptably or exploitatively large. Is that mechanism functioning adequately today?
http://www.ikeafans.com/articles/1000-ikea-corp/136-10-keys-to-ikeas-low-prices.html
IKEA's founder, Ingvar Kamprad, listed as one of the world's richest men
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Douthwaite, Richard (1996). Short circuit: Strengthening local economies for security in an unstable world. UK: Green Books.
p125 - The Irish credit union movement began in 1958 and in 1993 had 1.3 million shareholders (out of a population of 5.14m including NI). The UK's started in 1964 and only began expanding significantly in the late 1980s, and membership in 1993 was 100,000, up 40% on the previous year. In the US, 66m people, almost 1/3 of the population, are members of a credit union.
"There are several reasons for wanting to end, or at least dramatically reduce, the involvement of outside banks in one's community. One is that using an external bank's services to do a job that can be done within the community causes a significant loss of purchasing power, which can only be restored if the community sells goods and services to the outside world and thus stays dependent on it. The farmers who lent £943 million to the Irish banks in 1993 would have been paid about £10 million in interest, while farmers borrowing the same amount would have paid perhaps £113 million for the privilege, making a net loss of £100 million to the farming community.
"Not all this different would have left rural areas become some would have gone to pya the bank staff and thus have been returned to the local flow of national currency. However, since branch operating costs are usually less than half a bank's income, using outside banks to effect a transfer from one group of farmers to another causes a substantial net drain from rural areas."
p125. I guess he did the calculations himself based on banks reported interest rates for savings and loans. The figures of amounts of savings and loans come from the Central Bank (of Ireland?) that collects figures annually for bank deposits from the farming sector, and that the figures reported are from 1993, discussed in Irish Farmers' Journal, 27 January 2004.
Beck, Thorsten et al (2005). SMEs, Growth and Poverty. World Bank / US National Bureau of Economic Research.
find no relationship between concentration of SMEs in an economy and the reduction of poverty or inequality. But they don't consider distribution of wealth.
i think firm size is important
they only consider SMEs in manufacturing
they find a statistically significant relationship between economic growth and the size of the SME sector
but cannot identify a causal relationship
they use a 'newly constructed database on the share of total manufacturing employment accounted for by SMEs (Ayyagrari, Beck and Demirguc-Kunt, 2003).
'it would be useful to have information on SME employment beyond manufacturing, but cross-country data are unavailable for the share of SMEs in other sectors."p10
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Porritt
"Production for profit, as opposed to production for human needs, was perhaps the simplest of the old ideological divides between capitalism and communism. Some socialists and radical greens continue to argue that it is 'the profit motive' (the pursuit of profit as the single most important objective in any economic exchange) which still lies at the heart of capitalism's inherently destructive tendencies.... it is the urge to maximise profitsthat causes some companies to cut corners if they can getaway with it and to externalie as high a proportion of their costs as they are legally permitted to do. In The Corporation Joel Bakan (2004) describes the modern corporation as 'an externalizing machine.'"
argues that only governments can force companies to internalise costs.
"Profitability has quite simply become the key measure of corporate success in a capitalist system..." p73
(we value what we measure and we measure what we value)
"This process of 'creative destruction' ensures the reallocation of capital and other resources from the less productive to the more productive, however painful such reallocations might be at both the micro and the macro level. And it is those profits that provide the dividends upon which the lives of hundreds of millions of people now depend in terms of their pension and other investments." p73
issue around boardroom pay rising sharply at a time when company performance was falling, and pay at other levels was rising far, far more slowly
"Defenders of such an astonishingly powerful accumulative capacity point out that none of this necesssarilly impacts negatively upon those on low incomes in the UK, or in terms of the global economy, upon the world's poorest people. All of that money still has to go somewhere, whether it's in terms of consumption, philanthropy, investment or anything else. There is, therefore, an unavoidable trickle-down effect, regardless of the scale of accululated wealth... However, it seems impossible to argue that the world is a better place for the concentration of wealth in the hands of so few; by implication, therefore, 'sustainable capitalism' would necessarily need to find ways of limiting the concentration of wealth." p74
(I don't like this language of 'limiting' - it's very unattractive. I prefer a language of improvement)
Jeff Gates in the ownership solution reviews ways in which 'a pragmatic ownership strategy could weave a broader web of personal, economic, and civic participation.'
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Karl Marx, Capital
p148 - time of the working day - argues there is the time to generate sufficient value to sustain yourself, your family, and we generally work more than that. (I think he doesn't include the need to accrue personal, community and state level surplus - savings, pensions, rainy day fund, new stuff fund).
For Marx, the greater the surplus value output, the greater the surplus labour input, or, in other words, the greater the theft of life time, life value, from worker by capitalist.
Think it's not that simple. Social and physical technologies can increase productiity without a correponding increase in labour, I reckon. Surplus is also created by inputs from consumers, (investors?) social and natural capital, etc.
p120 - like Porrit says - he distinguishes between making boots to make good boots so that your fellows may wear good boots and your family may be comfortable - one on hand - and making boots in order to produce capital on the other.
(margin notes - being should not suffer in the process of creating value for others. But if i am boss, shared ownership feels better. (If I can choose who I'm working with :)
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