A radical proposal

“I am a Hayekian who believes in the national interest and defending it.”

By Gary Scarrabelotti

According to an article written by Grace Collier in today’s The Australian

 “Holden is going because it is easier to spend $600 million leaving Australia than it is to get out of its enterprise agreement with the union.”

From this succinct sentence we learn two things.

First, that the value GM puts on GMH is $600 million. 

This means that GMH, which will spend that money, could instead contribute the $600 million to an employee share plan and the plan could buy GMH and hold it on behalf of the employees. 

Secondly, whatever other factors are in play in the demise of GMH, the unionised workforce has delivered the coup de grâce to the company. 

This means that, if Australia has a future as a manufacturing country, the union movement has no part in that future. 

What is to be done? 

The future, if there is one, for Australian manufacturing would look like this: a mass of small- and medium-sized businesses, staffed by a workforce of non-unionised worker-owners, with the companies they own being run according to Open Book Management (OBM) principles. 

That is to say, the employees would hold major stakes in the businesses where they work and the management of these companies would empower the workers to have a decisive role in directing the operations of the business, above all at the workplace level. 

This could be achieved by managements sharing with employees, on a “real time” basis, the fundamental business “numbers” and then freeing the workers to fashion and direct their own workplaces in order to “beat the numbers” — and, thereby, to accomplish the survival and flourishing of their businesses. 

There is a challenge here both for the workers and for the entrepreneurial class. 

For manufacturing workers, they would have to wean themselves off the unions. They would have to abandon the proletarian mentality – “I just work here!” — and become actively responsible for the survival, growth, and well-being of the companies that employ them.

But that’s not the end, or even the beginning, of the kind of responsibility I am talking about.  There is also responsibility for oneself, for one’s workplace mates, for one’s family and community and country. 

For entrepreneurs, the challenge will be to abandon their attraction to top-down management practices under which employees are deployed and commanded as if they were soldiers in an 18th Century army. 

Entrepreneurs, inventors, and business tyros really come into their own as creators of great businesses when they unlock the human capital of their employees. 

All too often, the potential to flourish as producers is imprisoned within rank-and-file employees by management practices which deny responsibility to the worker. 

That’s a possible future. But what of the present? What if anything could (or should) the government do about Holden? 

I believe that it is a strategic national interest for Australia to have an advanced manufacturing industry. What I don’t know is whether making cars should form a part of it.

Hands-on Hayek 

My own position is this: I am a Hayekian who believes in the national interest and defending it. 

Just as governments must draw on our treasure to defend vital national interests in the international sphere by diplomacy and sometimes by war — and most often without the prospect of any measurable financial benefit — so too a government must defend vital internal national interests. 

I believe that it is a strategic national interest for Australia to have an advanced manufacturing industry. What I don’t know is whether making cars should form a part of it. 

What I do know, however, is this: it is going to take three or four terms of government to build the manufacturing future that we have to have to be a credible nation and, more importantly, to be a credible community to our own people. 

So, if I were a cabinet minister, I would not wish to see hundreds of thousands of recently unemployed manufacturing workers swelling the dole queues in 2016.

If that were to be the case, then there will be no second term for me and no manufacturing future that my government could claim to its credit. 

This is what I would do then – and here I go back to my opening points.

Since GMH is clearly valued now at a mere $600, GM should be lent upon to sell out to an employee share plan and to exit the business ASAP.

The federal government could enter into a contract with the Holden workers to continue to support Holden, for a limited period, on certain conditions. 

The government’s conditions should be: 

  • That employees of the new Holden should leave the union and form their own Holden employee-owner’s workplace association; 
  • That no union official, or former union delegate, should be entitled to become a member of the Holden employee-owner’s workplace association or, for that matter, could they continue as an employee of the new Holden; and
  • That the Holden management must begin – and carry through — a program to transform Holden into an OBM company. 

Finally, in return for its continued financial support, the government would hold an equity stake in Holden and appoint entrepreneurs to represent its interests on the board of Holden. 

Now, what might the government interest here be? 

To exit Holden after having overseen its transformation into a worker-owned OBM manufacturing business which, at the point of government exit, might (or might not) still be making cars. 

*This is an edited version of an article originally published on the HenryThornton blog..


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