While private equity is ordinarily used to exploit workers in pursuit of profit, we believe it can also be used to emancipate them. People’s Private Equity (‘PPE’) is a diverse group of people exploring how to make private equity serve socialist ends. That means developing a series of investment vehicles governed by a process of increasing workers’ control over their workplaces, thereby reversing the subordination of labour to shareholders and the managers they appoint. Our plan is to harness finance and use it to build socialism at the level of individual firms.

The project has led us to conduct research focusing on transforming finance and relations at work. Our specific aim is to develop the tools to intervene in the material process of financialisation and worker exploitation. As one of our first public actions we held a community launch in New Cross, London on 15th September 2018. Our audience at the event ranged from members of the local homeless community to financiers and academics. We hope PPE will become a space to incubate inclusive discussion, and to foster alternative visions for our financial and institutional future.

What is private equity?

Private equity is a financial mechanism by which already existing, privately-owned firms are acquired and reconfigured by an investment fund. Institutional investors and high-net-worth individuals provide the necessary capital, which can be used to fund new technology, make acquisitions, expand working capital, and consolidate a balance sheet.

This is usually put forward as a way for firms to escape the ruinous discipline of finance-led capitalism, as it enables an activist approach with longer investment timescales. But it has also been central to many cases of ruthless predatory behaviour in pursuit of profit. For instance, Sir Philip Green became notorious after buying BHS, only to saddle it with debt, raid the pension fund, and hide profits from the exchequer in a Monaco tax haven, before selling the debt-crippled company for £1 and leaving it to collapse shortly thereafter.

Private equity is a form of investment in which the force of inequality latent within capitalism can be supercharged. Layoffs, “sweating” of assets, decreased wages, increased worker exploitation, and unwarranted accumulation of debt are typically used with few impediments, all in the name of returns to investors. It incentivises the worst tendencies of neoliberalism, forcibly subordinating smaller firms to larger investors without any of the benefits of shareholder-led investment.

What makes PPE different?

Private equity investors primarily seek to maximise returns. At PPE, we are exploring how the methodology can be repurposed to advance workers’ collective benefit. However, developing such a strategy is complex and challenging. The project will require us to approach hardened capitalists with requests for substantial sums of money.

One possible approach centres on the emerging market for ethical Collateralised Debt Obligations (CDOs), the riskiest ‘tranches’ of which are effectively loss-making. This allows political and socially motivated investors to make what amounts to philanthropic donations, leaving the profitable priority tranches for more risk-averse, traditional investors to purchase.

At their most ambitious, PPE funds might therefore develop a vehicle that intentionally returns a loss for at least some of its investors. A £100 million fund that returns a £99 million yield at full maturity would have the potential to effectively socialise the negative £1 million margin. But PPE does not yet need to decide whether our funds will offer a positive return. It is possible to create multiple funds and explore both profitable and loss-making iterations.

Beyond quantifying the financial yield, PPE funds will additionally measure social and ecological returns on investment. Much like the activist funds operating on the current model of private equity, PPE will implement our own ideological restructuring of relations of work, environment, and sociality.

Empire-in-reverse: decolonising finance

Empire is characterised by highly unequal, often violently enforced flows of resources between core and peripheral nations. PPE aims to explore those flows and attempt to reverse them, ensuring that greater returns from labour flow to the periphery.

PPE is currently based primarily in London, but we have formal and informal links that extend far beyond that. London is an imperial metropole, and we are therefore highly critical of the institutional, cultural and geographical context in which we find ourselves. We take seriously the possibility that to be meaningfully anti-imperialist, at least some PPE funds might need to be headquartered not in London but in peripheral nations.

In Britain there is a distinction between its formal and informal empire. The formal empire is usually said to have ended around 1956 following the Suez ‘crisis’. The informal ‘neo-imperialism’ that replaced it is administered by US-dominated international institutions such as NATO and the World Bank. When this new empire functions at its best, it is barely visible even to those most exploited by it.

Despite the decline of Britain’s formal empire, the City of London remains a vital organ in the neo-imperial global constitution. PPE aims to pioneer and pursue a policy of confronting, redirecting and even helping to dismantle such imperial institutions. We propose to revisit and interrogate exploitative flows of capital, labour, knowledge and power. Ours is a programme of ‘empire in reverse’ aimed at decolonising finance.

In practical terms, that will require investment and operational decisions designed to transfer wealth away from, rather than towards, core imperial nations and direct it towards, rather than away from, imperial peripheries. This necessitates exploration of the division of labour separating core and peripheral nations. What is the political, logical, historical and institutional arrangement that allows US tech workers to design the latest iPhone, while Chinese factory workers are left to assemble it? Why does this arrangement force Bengali sweatshop workers to manufacture clothes for British consumers, and not the other way around? And, having grasped the complexities of this arrangement, how can workers reorganise their firms in order to challenge it?

This anti-imperialist approach to finance might also prioritise technology transfer to underdeveloped and impoverished neo-colonies. A global minimum/living wage policy would increase the purchasing power of workers in those peripheries, and would commit PPE to increasing material equality between workers at the international level.

Is there sufficient social value in a fund that exists only in the interstices? Without ambitious plans for the transformation of at least an entire sector, PPE funds risk lapsing into opportunism. Just as squatting empty buildings cannot, by itself, solve the housing crisis, neither will “squatting” in the finance sector overcome imperialism or resolve the global financial crisis.

Equalising wealth and global minimum wage

PPE funds will buy the equity in private firms and use the resulting management control to make transformative operational decisions along socialist lines. The worker-focused productivity enhancements that follow will be redistributed to labour at the expense of capital.

Socialist management reforms will also bring back workers’ knowledge of the production process and autonomy in work. This may include workers’ cooperative management structures, flattening staff pay to a 1:1 ratio, implementing a 4 day week, and implementing a global minimum wage across all purchased firms. This corporate transformation will be worker-led, using the mechanism of workers’ enquiry to identify and resolve grievances and pursue projects emanating from the shop floor.

Cooperatives have traditionally redistributed wealth within the firm by giving workers a share in the profits. But taking control of domestically owned firms means benefits will be confined to domestic workers. We intend to stretch this concept further, redistributing wealth between firms and workers in the northern core and southern periphery. In this way, PPE funds will develop an explicitly internationalist and anti-imperialist praxis.

According to World Bank data, the past 50 years has seen the per capita income gap between the global north and south roughly triple in size. 60% of the world’s population live on less than $5 dollars a day. Often, attempts to build worker cooperatives in the global north ignore these facts, focusing on equalising power within firms and leaving global inequality as an unchangeable afterthought. PPE will take the opposite route, making the implementation of a global minimum wage one of its core aims.

As anthropologist Jason Hickel argues, a global minimum wage is realistically implementable and does not significantly increase prices of goods and services produced in interactions based on “basic justice”. An internationalist socialist praxis should engage in a process of pushing wealth – in this case through increased wages – to imperial peripheries. It will also be critical to restructure worker-relations in firms in imperial centers to offset the potential for imposed scarcity by creating more leisure time, increasing workers shares’ in profits, and ultimately facilitating degrowth. The symbol of “Fair Trade” needs to be expanded in recognition that all production should have at its base material, international solidarity.

Economic equality operates at different levels: between workers in a firm; between firms in a sector; between sectors in a national economy; and between national economies within a global economy. PPE must make decisions about where its funds will operate within that schema of concentric circles. This means actively thinking beyond the national economy.

Increasing worker control

Worker control will require both a formal transfer of equity, and an informal transfer of management knowledge. A fund will buy a firm from its current owners, and over time transfer ownership and control to the workers. That timescale is determined primarily by the demands which capital makes for a return on investment. Faster returns, within the 3-5 year timescale normally observed in the private equity sector, will increase the rate of worker exploitation in the short-to-medium term.

If a PPE fund buys up firms which have excess profits, over time it can transfer a small proportion of those excess profits back into a worker-owned fund, thereby gradually reducing the amount of exploitation that exists in the first place.

Management from the bottom up and workers’ inquiry

In recent years, path-breaking unions like IWW, UVW and IWGB, in collaboration with groups like Notes from Below and Workers’ Wild West, have been rediscovering the methodology of workers’ inquiry. Drawing inspiration from these groups, PPE will co-produce knowledge alongside workers themselves, during and after acquisition. PPE will study and learn from the Lucas Plan, the Meidner Plan, and other worker-led initiatives, and embed their lessons as a central part of our praxis. Doing so activates the invaluable knowledge of those who practically create value in the workplace: workers themselves. Our approach will be to encourage workers to think more deeply about how work is produced and reproduced in the firm, and to conceptualise the potentialities of worker-ownership as a mode of struggle, self-actualisation and emancipation.

Various possibilities exist for pursuing bottom-up management. As part of the legal fabric of the fund, all companies might be required to adopt stringent and binding collective bargains. They might include provision for 100% trade union membership (‘closed shop’ agreements), the right to strike without notice, and the election of managers subject to recall by the workers whom they represent. Such reforms will necessary push up against, and expand beyond, the existing legal and social constraints that define the neoliberal workplace.

Capitalising PPE funds

Of the challenges PPE faces, capitalisation is clearly the biggest. Should our funds solicit investment from high-net-worth individuals and pension funds, and if not, what is the alternative? And what role could the state play in sourcing the necessary funds?

Capitalists have money and our funds need it to function. By approaching them directly we can capitalise the funds more quickly. Money taken from capitalists and invested into workers cooperatives is not being invested into more typically capitalist businesses. And since PPE’s core aim remains the redistribution of wealth in society, how is it possible to do that without gaining access to wealth owned by capitalists?

On the other hand, PPE may struggle to offer competitive returns to capital, at least in some sectors. Establishing workers’ cooperatives with explicitly anti-extractivist policies might conflict with this imperative. A key challenge will be curtailing the power of capitalist investors to influence the management decisions of the funds and the firms they purchase. Capitalists will also demand conditions. If a fund fails to meet a rate of return, investors will exercise the legal right to take over the firms owned by that fund.

The state also has money, and can levy money to invest. The state can offer lower rates of return, as it can borrow at a cheaper rate, and can even subsidise projects at a loss to the taxpayer. A given PPE fund may have more leverage over the state if it fails to meet rates of return. And there is greater democratic accountability over state investment than over the capitalist investor.

But there are problems with state investment. Even if a Labour-controlled UK state did support the fund, that very support would necessarily limit the anti-imperialist activities of the fund. The funds, especially those with more radical core aims, may be co-opted. And, crucially, the state works hand in glove with British and transnational capital – why would it support a PPE fund if not to co-opt it?

In time, and following the example of experiments like Mondragon in Spain, it may be possible for PPE to develop its own organic source of capital: from the firms it has helped to transform. In the long term, socialists will need to develop an ecosystem of new financial institutions tasked with financing a more materially equal society. PPE aims to contribute to the process of pioneering such a system.

Working in and out of the Labour Party

Though operating at the level of individual firms, the success of the fund and the ability to upscale its underlying methodology will depend substantially on macroeconomic factors. This raises the question of what PPE’s relationship should be with the Labour Party, if any.

On the one hand, PPE remains wary of the Labour Party, with its consistent, explicit prioritisation of the British working class at migrants’ expense. Labour’s latest manifesto makes no mention of Britain’s Empire, formal or otherwise. And the Party has pledged to increase the number of British border guards by 500. Labour has much still to prove if it is to overcome the charges of social chauvinism, border Keynesianism, labour aristocracy, and imperial militarism.

On the other hand, the Party has clearly pivoted to the left. Last year’s Labour Party conference saw John McDonnell, the shadow chancellor, unveil a game-changing policy: the imposition of inclusive worker ownership funds on businesses with over 250 employees. This policy, and its apparent popularity, has a direct bearing on the political and economic context in which PPE now operates.

PPE might work in tandem with this policy by initially focusing on purchasing small businesses with less than 250 employees. According to research from the New Economics foundation, there are 116,372 family owned businesses in the UK with less than 250 employees which are potentially receptive to a change in ownership. PPE might start by approaching workers in these companies and asking them a simple question: would you prefer to own this company, or see it handed down to the boss’ indifferent relatives? Though this goal may be limited in terms of our wider transformative focus, it provides a way to develop a social base for further investments by anchoring alternative funding arrangements in firms oriented in the domestic economy which are ripe for productive change.

Thinking publicly about finance

By exposing our project to scrutiny at this early stage we aim to participate in a broader public discussion about how to change finance and wider society. Among other things, PPE is an iterative and empirical experiment. The agents within PPE seek to avoid Donna Haraway’s “god-trick” of seeing everything from nowhere. We are members of our communities, renters, workers and activists in other struggles. As subjects enduring the effects of late capitalism, we approach the redeployment of private equity as an attempt to both repurpose and dismantle “the master’s tools”. We are consciously constructing spaces of conversion in which those who hold knowledge of private equity meet those who do not.

By starting from the ambitious theoretical standpoint of a critique of the global political economy, we necessarily return to the practical challenges of founding an actually existing private equity fund. As this outline of PPE makes clear, we have much work, both practical and theoretical, still to do. We will be expanding and developing the project at our Transforming Finance conference on the 16th of February at Greenwich University.

There remain unresolved questions at the heart of our project, chief among which is the central challenge of how to socialise capital against the interests of the very investors whose capital we are asking to borrow. Yet we remain committed to exploring the possibility that private equity, and other financial mechanisms, have the potential to reconfigure existing capitalist firms into egalitarian workers’ cooperatives run on socialist principles.