Chapter 14

Transforming the state: Towards
democracy-driven public
ownership
By Hilary WainwrightThis chapter asks ‘What are the conditions of possibility for democratic
public ownership?’ This is a question facing those, across the world,
who believe in a democratic egalitarian economy. But this chapter will
focus on experiences, struggles and ideas concerning public ownershipin two countries more specifically, Uruguay and Britain. Both arecountries where questions of public ownership have played an importantpart in national politics. Both national experiences of public ownershipprovide challenging laboratories for thinking through what are thepolitical, administrative and industrial relations factors favouring the
democratisation of public ownership.
First a background historical note on each country. In Britain, the major
utilities and the primary industries in coal and steel1 were nationalisedby the Labour government, which followed the Second World War. Thesepublic utilities and industries were re-privatised later by Margaret
Thatcher between 1979 and 1990. In 2017, the Labour Party committed
itself to bringing all the utilities back into public ownership. Moreover, itcommitted to doing so under democratic forms of public administration,
involving the participation of frontline workers and users.2
In Uruguay, the public ownership of utilities goes back to the earlytwentieth century when José Batlle y Ordóñez led the country under very
favourable economic conditions and made the welfare state (one of thefirst in the world) and the expansion of public enterprises a basis for class201

Transforming the state: Towards democracy-driven public ownership

harmony, social mobility and a satisfied middle class.3 This integrative
approach, led by the state but facilitated by a mandatory, secular national
education system (established at the end of the nineteenth century)
became known as Batllismo and is a semi-permanent part of the political
economy of Uruguay, entrenched in the constitution and outlasting the
1973–85 military dictatorship.
In the late ’80s, the elected governments of the right initiated a processof privatisation in Uruguay, in line with the global neoliberal economic
orthodoxy. The majority of the people in this small country of 3.5
million resisted the global trend towards privatisation. The resistancewas organised through an alliance of a politically radical trade union
movement – which under the leadership of the Communist Party had
played an important role in opposing the dictatorship –, networks ofcommunity activists and the coalition of left parties, the Frente Amplio,
which won the government office in 2005. The resistance to privatisation
used a provision for referenda in the democratic constitution amended
after the fall of the dictatorship, not only to defeat the privatisations
but also to entrench the principle of water as a public good into theconstitution along with the principle of democratic participation in its
management. The Frente Amplio governments of 2005, 2009 and 2014
developed a more radical form of public ownership than Batlle’s model
based on national integration. Frente Amplio governments treated public
enterprises as instruments of state-led industrial strategy to meet socialand environmental as well as economic goals.4

Democratic public ownership requires a democraticstate
A fundamental lesson from both the limits of the 1945 nationalisationsin the UK and, positively, from the more recent attempts to democratise
public enterprises in Uruguay and make them part of a state-led
industrial strategy to meet social, environmental and economic goals,

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Transforming the state: Towards democracy-driven public ownershipis that the ideal of democratic public ownership cannot focus simply
on mechanisms and relationships internal to an industry. Since we aretalking about state ownership, we have to think about the nature of thestate itself and scrutinise how democratic it is or is not, looking at two
dimensions:•the function and mission that the elected government gives to publicindustries and how they are managed; and•the extent of openness to citizen participation in, and awareness of,the decision-making of public industries.

First then, this chapter analyses the lesson from the UK’s 1945
nationalisations regarding the state. The original nationalised utilities –British Gas, British Telecomm, British Rail, and so on – were seen as
insufficiently responsive to service users, which helps to explain why
Thatcher faced little resistance to her privatisation programme, until shecame to the National Health System where her privatising plans came up
against an exceptional degree of user and staff loyalty.
From the perspective of the importance of a democratic state for determining the character of the nationalised industries, the limits of Labour’s1945 nationalisations from the standpoint of democracy were not surprising. The Labour government had inherited a state originally constructed to manage an empire. Its methods were (and still are) secretive,
its unwritten rules opaque to the public but infinitely flexible for the
powerful, who were hence under no obligation to be accountable. This
peculiarly elite rule, which Labour has traditionally sought to deploy
for its own purposes rather than for social transformation, is based ona historic compromise that led to Britain becoming a ‘constitutionalmonarchy’ rather than a republic.5 As such, various functions of government are neither subject to parliamentary debate nor to public scrutiny.
A symbol of this is the way that Members of Parliament swear their oathsof allegiance not to the people but to the crown, which, in effect, stands
for the moral authority of the state.

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Transforming the state: Towards democracy-driven public ownership

The consequence is that there is little recognition of the importancefor democracy of open public debate on the rules that guide how we aregoverned. Yet without explicit, democratically formulated and publicly‘owned’ rules, the ruling elite is left to interpret unwritten rules
and conventions more or less as it likes. Neither the public nor theirrepresentatives have an adequate basis, beyond party manifestos, on
which to call the executive to account.
This culture of flexibility disguised by opacity pervaded all parts of thestate, including the nationalised industries. The nationalisations of 1945
were mainly pragmatic, a means to reconstruct after the war. There was
no explicit statement or agreement on their social objectives, and hence
no mechanism for public scrutiny or amendment.
In this model, politicians, advised by specialised professionals, set
policy goals, and managers had day-to-day control as if they were
simply technicians. This form of administration treated questions of
implementation (the sphere of management) as purely technical, with
only one ‘correct’ approach. It militated against popular participation andthe debate and judgement that this would have entailed in the process of
implementation.
For a positive example of how a democratic, written constitution influences
the way public enterprises are managed, we can look at the experience ofUruguay, a country that has not only developed a democratic constitution
to protect collective and individual rights but whose recent history has
also produced a unique political economy in which public enterprises playa leading role in meeting social and environmental development goals
rather than simply increasing state revenue or providing infrastructure
for the private sector. Under governments of the Frente Amplio, it became
an exemplary case of a developmental state,6 as distinct from a competitiveor market-led state.7

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Uruguay from 2005 to 2019 (when the Frente Amplio government was
narrowly defeated) illustrated two key features of a developmental state.
First, it intervened in the market to promote economic development
rather than allowing market forces to determine the future of thenational economy and the life chances of those who live and work in it.
Second, it coordinated the different parts and powers of the state andstate enterprises around explicit social and developmental goals, such as
overcoming poverty, establishing economic security and strengthening
the self-confidence and power of working people.
Public companies are seen as a central means of intervention in themarket through their investment strategies and their purchasing andemployment policies, and through their coordination to meet social andpolitically determined goals. For instance, Uruguay’s public utilities all
had social objectives written into their missions. This explicitly social
purpose has influenced how the public views these companies and has
led to an unusual degree of popular support for the state and to public
consciousness of the social, pro-public role of the state enterprises.
Two distinctive dimensions of Uruguay’s constitution are particularly
important. The first is the longevity of the public sector as part of theconstitution, even though it has changed character in the twenty-first
century compared to the model of José Batlle in the last century. Publiccompanies are part of the constitution and hence understood as partof Uruguayan democracy. Generations have been educated in this viewof their country. Hence, they have been quick to mobilise to defend
these companies against privatisation and eager to advance democratic
principles (as in the case of the public water company through which they
won the right of citizens to participate on company boards).
The second dimension is the importance of providing a foundation stoneof public values to which citizens can refer to protect basic social as wellas individual rights. In Uruguay, the constitution is a living institution

205Transforming the state: Towards democracy-driven public ownershipthat citizens can change democratically to meet new needs, such as toprotect water as a natural commons from the pressures of the corporatedriven global market.
For a constitution to be democratic, it must be drawn up with full popularparticipation so that its values reflect the realities of people’s lives.
Such a constitution could establish the fundamental framework andshared values of democratic public ownership in the UK and elsewhere,with subsequent legislation determining specific organisational andgovernance structures. In turn, this would frame how public enterprises
are to be managed, turning questions of management from being purely
technical to questions that recognise how forms of management have an
impact on the nature of power relations.

Valuing the practical knowledge and capacity of every
citizen
The means of management, then, are neither value neutral nor simply‘techniques’. For a start, they either perpetuate or challenge existing
relations of power, including those based on race, gender and class. And
they shape the character of social relations both within an institution
and externally – for example, whether they are collaborative, hierarchicaland/or competitive. In other words, there are choices involved in theimplementation of policy, based on purpose and values. The recent
proposals of the Labour Party illustrate an alternative option to the modelof implementation that, until 2017, had been typical of Labour’s approach
to public ownership.
‘We should not try to recreate the nationalised industries of the past’,said John McDonnell, the British Labour Party’s Shadow Chancellor of
the Exchequer. ‘We cannot be nostalgic for a model whose management
was often too distant, too bureaucratic’. Instead, a new kind of public
ownership is needed based on the principle that ‘nobody knows better206

Transforming the state: Towards democracy-driven public ownership

how to run these industries than those who spend their lives with them’.8
John McDonnell’s principle of valuing the knowledge and capacity of every
citizen implies a profound cultural shift in the attitudes and strategies ofpublic sector management and in the consciousness and self-confidenceof working people. This requires a break from both the ‘new public management’ encouraged by Thatcher to apply private business methods tothe public sector and from the command-and-control hierarchies of the
post-1945 state, inherited from the war and reinforced by the paternalistic
and narrowly scientific understandings of knowledge of Labour’s policymaking elite.
What does this innovative approach of John McDonnell imply about how
we move beyond – democratise – these traditional models of publicmanagement in which democracy meant only electoral democracy? The
assumption behind post-1945 public utilities in the UK and Thatcher’s‘new public management’ was that the knowledge to implement thepoliticians’ mandate lay with the experts. Beatrice Webb, an influential
adviser to Labour leaders from the Fabian Society – a group of left-wing
intellectuals who were part of the founding of the Labour Party – put thisvividly when she wrote in her diary: ‘We have little faith in the averagesensual man. We do not believe that he can do much more than describe
his grievances, we do not think he can prescribe his remedies’.9
Policies based on this approach have meant that possibilities for increased productivity that enhance workers’ skills and satisfaction are
missed, resulting in production processes that exhaust, de-skill and demoralise otherwise creative, energetic workers and fail to respond to thespecific needs and desires of service users. This has meant for instance,
public housing designed by architects who live in entirely different environments; public transport planned and run by people who travel byprivate car; and women’s lives shaped by public provision designed andmanaged by men.

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A simple reversal of new public management and the Fabian approachis not enough, however. In developing John McDonnell’s ‘new model of
public ownership’, we must address the problem of how, and throughwhat institutions and processes, the knowledge of those ‘who spend
their lives with these industries’ (both those who work for them and thecommunities and users affected by them) can gain effective expression
and utilisation.
This is not simply a matter of democratic principle. Rather, because
this aspiration to ‘radical’ democracy is based on a recognition of thepractical knowledge and capacity of all, it is also the basis for improved
public efficiency. In a sense, it implies a realisation of Marx’s ideal ofa society in which the ‘fulfillment of all depends on the fulfillment of
each’. It could be called ‘productive democracy’, as distinguished from aliberal democracy in which political rights are conceived in isolation from
economic and social equality.10

Workers on the board: necessary but not sufficient‘Workersontheboard’

isthecommonunderstanding

of

the

democratisation of public companies. Certainly, worker representation isnecessary if a real change in the relations of production is to be achieved.
But it is by no means sufficient to change the balance of power between
management and workers, which is essential for workers’ knowledge andcapacity to have an effective influence on company efficiency in meetingsocial goals.
Experience has shown that unless there has been a change in the balanceof power in the workplace, due to trade union organisation and changed
management methods, board representation alters little. This is illustrated negatively by the experience of Mitbestimmung in Germany, where
the fact of workers on the board has often had limited effect unless theunions were strong and in those circumstances the influence of workers

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Transforming the state: Towards democracy-driven public ownershipwas more through collective bargaining than through participation on
boards. ‘Workers on the board’ is illustrated positively in Uruguay, where
union industrial power and political influence has been decisive and theunions have pushed for board representation as a means of consolidating
their power through collective bargaining and political accountability.11
Furthermore, the social benefits of practical and often tacit knowledge
cannot be realised by simply being turned into ‘demands’ fed throughthe structures of a union or company from shop floor to the board. Of
course, on some key decisions, workers’ views can be conveyed throughsuch a process, but there is a deeper level of workers’ and citizens’
knowledge that is tacit and embedded in skills and capacity that are
expressed and shared through practice, whether in technological design
and manufacturing, caring for other people, or creating works of art. This
practical dimension of knowledge can only be released for the benefit of
all through collaborative practice.

Replacing market ‘discipline’ with that of social andenvironmental needTo move beyond hierarchical models in the public sector, we need to learn
from Elinor Ostrom’s approach to the management of the commons12 andencourage principles like strong common purpose, inclusive, participatory
decision-making, commitment and peer-group monitoring, fairness inreward and cost, just conflict resolution, local autonomy and consistent
governance. This would involve replacing the bureaucratic hierarchies
traditionally typical of the public sector with structures that coordinate
problem-focused teams working within the framework that encourages
experimentation and innovation.
Still, worker representation plus democratic relations of production
and/or service delivery are insufficient to meet fundamental social andenvironmental goals, such as transition to a low-carbon economy or209

Transforming the state: Towards democracy-driven public ownershipovercoming the poverty, exclusion and wasted human talent caused
by decades of market-driven politics. Unless its external economic
relationships and environment are changed, a publicly owned company
is still subject to the same pressures that lead private companies to act inanti-social ways.
The ‘discipline’ of the market must be replaced with the discipline ofdemocratically determined social and environmental need. To achievethis, all the different powers of public bodies – procurement, borrowing,
employment, planning, property ownership, environmental and healthand safety regulations, and more – need to be deployed to take asmuch economic activity out of the market-driven economy and into thecooperative or public democratic (ideally) economy. Public money could
then be used to generate a positive ‘multiplier effect’ in meeting need andcreating socially useful and satisfying jobs. The social and environmental
benefits resulting from public economic activity as it percolates throughthe economy must be accorded value beyond the monetary cost andbenefits of the initial expenditure. This move beyond single public sector
organisations towards a decentralised democratic economy is alreadybeing at least exemplified through local government.

Community wealth building – an example of analternative to market discipline
Economic collaboration across the public sector and with co-operatives
around a common purpose is already happening in a few localities in
the UK, developed through local councils in the nationally hostileenvironment of a Conservative government. A pioneer exemplar of sucha collaborative approach can be found in what has become known as‘community wealth building’ in the UK. Inspired by US experiences ofmore democratic forms of community economic development, it began
in Preston post-2008 after the local authority was let down by a private
partner in a major regeneration project.13 As part of the ‘Preston Model’,210

Transforming the state: Towards democracy-driven public ownershipthe council has collaborated with other public authorities in the town andregion to deploy their procurement budgets, investments and workforce
development policies to support local, unionised and democraticenterprises (such as co-operatives).
The Preston model offers a building block for further systemic change.
National government support could strengthen and spread such local
exemplars with greater powers to local government and through a
network of regional public development banks.

Moving from a defensive to a transformative tradeunionism
Government action is necessary, but insufficient and limited, given theimportance of achieving collaborative rather than hierarchical relationsof power and a form of organisation that can facilitate the sharing of tacitand practical knowledge.14 The democratic drive in an effective strategy
for democratic public ownership requires the central involvement of atransformative agency beyond government, like trade unions.
For instance, recent experiences of community wealth building have seen
innovative local councils, determined not to be dependent on private
finance, turn to workers’ co-operatives, other public bodies and the tradeunions within them, for alternatives that would grow the local economy.
Similarly, the wealth creators, the working and would-be working people,
organised through their unions and co-operatives, should be the allies
of a government seeking to democratically transform the economy. And
sometimes, as in the recent history of Uruguay, they are – or show how
they could be.
By way of illustration, in Uruguay the vision of democratic, socially useful
public companies is shared and sometimes driven by the trade unions.
Here is how Gabriel ‘Chefle’ Molina, president of the telecoms union

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Sutel, sees the significance of the industry being public: ‘because [thetelecoms company] Antel is public, its services must be for everyone –including those who can’t afford it. [And because revenues go back to thestate] nowadays we have tablets for pensioners and laptops for young
kids to go to school and study with’.15
This positive commitment to the social purpose of Antel has had practicalconsequences. First, it has led to the union being a strong supporter ofthe integrity of Antel as a public company and a fierce opponent of anyplans to privatise services or contract them out to multinational telecoms
companies.
Second, the role of the union went beyond the defensive to participationin the appointment of the new director of Antel at the time, Carolina
Cosse Garrido. For 10 years, in close collaboration with the union, she led
Antel in a direction that was both ambitiously innovative technologicallyand commercially, and also radical in its social provision.16 The involvement of the union, and specifically frontline workers, led to successes
that would not have been possible if the workers had not understood andsupported such ambitious projects.
The relationship between the unions in Uruguay and the left coalition
party was forged in the common struggle against the previous dictatorship. As a result, rather than a rigid division of function between them, as
seen in the UK, there was a culture of collaboration and mutual solidarity
against a common enemy, originally the dictatorship (until 1985), thenright-wing parties and then the corporate-driven global market. We are
beginning to see the signs of similar collaboration and solidarity in acommon cause – resisting austerity, privatisation and deregulation –in the UK. But even now key unions are not preparing a transformative
strategy for their industries, including in the public sector. Thispreparation, this shift to a more strategic, political trade unionism, is aprecondition for the realisation of democratic public ownership.

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Conclusion
In sum, democratising public ownership requires a radical shift in thebalance of power towards frontline workers, users and affected communities. Such a shift cannot be achieved simply by institutional engineering,such as workers on boards. This kind of institutional opening up isnecessary, but it will only release a democratic dynamic if there is a
conscious movement for industrial and service transformation comingfrom workers and communities themselves. And this requires a steadytransformation, including democratisation, of the labour movement
itself.
Note:

The author would like to acknowledge the help of Claudia Torrelli,Professor Jenny Pearce and Pablo Da Rocha of the Duarte Institute associatedwith the PIT-CNT federation of labour unions, for their contribution to the
Uruguay research on which this chapter draws.
ABOUT THE AUTHOR

Hilary Wainwright is a Transnational Institute
Associate and a Founding Editor of the British newleft magazine Red Pepper. Her research focuseson new forms of democratic accountability within
parties, movements and the state. She is also an
Honorary Associate of the Institute of Development
Studies, Sussex University.

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Endnotes1

Labour’s Iron and Steel Act of 1949 created the Iron and Steel Corporation of Great Britain asa nationalised industry. This was particularly resisted by the Conservatives (more strongly
than the other nationalisations) who refused to complete the process of nationalisation (thefact that steel companies also had interests in other industries made it especially complex andlengthy) when they returned to office in 1951. Indeed, they privatised it in 1953. It was renationalised by Harold Wilson’s Labour government in 1967, and privatised by the Conservatives
in 1988.

2

Addison, P. (1975) The Road to 1945. Jonathan Cape stresses the centralised origins ofLabour’s plans for nationalisation in the wartime coalition. However, S. Brooke (Labour’s War,1988) analyses the pressures from Labour Party members, especially the returning troops, fora radical shift in power away from the economic and political elite. The final outcome is wellsummarised in: Rugow, A. and Shore, P. (1955) The Labour Government and Industry 1945-51.
Blackwells. For more recent developments, see: Cumbers, A. (2012) Reclaiming Public Ownership : Making space for economic democracy. London: Zed Books

3

Pearce, J. (1980) Uruguay Generals Rule. Latin America Bureau.

4

For a useful history of the left in Uruguay until 2006 see: Chavez, D. (2009) ‘Uruguay. The
Left in government: between continuity and change’ in P. Barrett, D. Chavez and C. Rodriguez-Gravito (eds.) The New Latin American Left, pp. 99-127. London: Pluto Press.

5

Barnett, A. (2018) The Lure of Greatness.

6

Developmental states vary in terms of goals; Japan and other Asian developmental states tend
to goals of economic growth rather than, for example, overcoming inequality.

7

Chavez, D. and Torres, S. (eds.) (2014) Re-orienting Development. State-owned Enterprises in
Latin America and the World.

8

https://www.opendemocracy.net/en/opendemocracyuk/new-economics-of-labour/9Webb, B. (1948) Our Partnership. Longman.

10

Wainwright, H. (2018) A New Politics Fromthe Left. Polity.

11

Author interviews with Gabriel ‘Chiflie’ Molina, President of Sutel, the trade union in Antel,
Uruguay’s public telecommunications company and an affiliate of PIT-CNT, the national tradeunion federation.

12

Ostrom, E. (1990) Governing the Commons. Cambridge: Cambridge University Press; and Wall,
D. (2017) Elinor Ostrom’sRules for Radical. Co-operative Alternatives beyond Markets andStates. London: Pluto Press.

13

Chakrabortty, A. (2019) ‘In an era of brutal cuts, one ordinary place has the imagination tofight back’. Guardian, 6 March. See also: Berry, C. and Guinon, J. (2019) People Get Ready. OR
Books.

14

Wainwright, H. (2018), op. cit. For a full analysis of the nature of tacit knowledge see Polanyi,
M. (1966) The Tacit Dimension. Routledge.

15

Author interview with Molina, 2019.

16

Cosse, C. (2014) ‘ANTEL: A socially committed enterprise at the forefront of technologicaldevelopment’, in Chavez, D. and Torres, S., op. cit.

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