Dispersed ownership

One of the main arguments levelled against the nationalisation of industries is that when everybody "owns" something, nobody owns it. I never felt any sense that I owned British Rail and I don't feel any proprietorial glow about the National Health Service. Sometimes such institutions provide adequate or even good service, other times they reduce users to frustrated, impotent rage. In neither case is there anything you can do about it. You ain't the guvnor.

This leads sometimes to arguments about the Tragedy of the Commons. Tim reckons that the Common Fisheries Policy is a case of such; the larger the organisation that "owns" a resource, the less the care that will be taken of it. (I think there's a bit more to it than that in the case of the CFP, but that's another story.)

Chris Dillow just wrote this about large companies:

When a firm is owned by hundreds of people, no-one has an incentive to look after it properly - because the hassle of organizing with other shareholders to control or change the management outweighs the benefits of having a better-run company, as these are spread across everyone, including the free-riders who just sat back and did nothing.
Good management is a public good. And public goods get under-supplied when many individuals pursue their own interest.
Banks’ failures are therefore ownership failures.

That's a very similar argument. And it rings true to me. Most people who own shares either directly or indirectly, through a pension plan, perhaps, have little or no sense of ownership of those businesses and the managements have little interest in the views of these shareholders. It's the institutional fund managers who wield power.

I don't share Chris's optimism that government shareholding might usher in an era of better shareholder accountability. If nationalised industries suffer from this problem then so do large publicly quoted corporations, and vice versa.

So perhaps capitalism - and for once this is actually about capitalism - and socialism share this central flaw. On a small scale they work well. This might be small or medium sized businesses on the one hand, businesses with owner/managers or small groups of informed shareholders, and on the other hand smaller voluntary cooperative structures. On a large scale, huge publicly quoted companies and compulsory collectivist structures are prone to the same problems, for the same reasons.

If there's anything in this idea, then it's noticeable that advocates of socialism draw attention to the problems of capitalism without realising that their own ideas are vulnerable to the same attacks, and supporters of large scale capitalism do the same thing in reverse.

They do this in another way too. I see people on the right argue that public employees should be personally liable for their failures, and I see people on the left trying to increase liabilities for company directors. Few argue both things. But certainly at the moment it's easy to feel a twitch of sympathy for the idea that limited liability might be a driver towards untenable risk and that the managers of banks might behave differently if they were entirely liable for their actions. If this meant that few would be willing to risk running very large businesses the above reasoning suggests this might be no bad thing.

But the point is this: in both these cases if the right is correct then so is the left. Yet they'll still manage to disagree.