Time to set sail towards a new ethos in business

Article in the Scotsman by John Blundell

ILLUSTRIOUS economist Ronald Coase won his Nobel Prize after a long career at the top of his profession. But he often recalls he was awarded this intellectual version of the Olympic gold medal for ideas he first articulated as a youthful lecturer at the University of Dunin in the early 1930s.

A pivotal moment in his professional history is when he came to look at examples of ventures where it was claimed the market failed. Every textbook claimed that lighthouses had to be provided by the state, being an example of a public good.

But the opposite is true. Every port has a plain interest in being accessible and safe. Without maritime traffic, ports atrophy. What astonished Coase was the professional outrage at his discovery that lighthouses had a long history of being private or philanthropic and were emphatically not agencies of the state.

These thoughts were in my mind when I came upon the Royal National Lifeboat Institute - based in Poole, Dorset, yet active on every British coastline. No doubt it has flaws, but the RNLI seems to me so thoroughly virtuous and admirable that it deserves a big halo.

Conceived in 1789 after the wreck of the Adventure off the Tyne and formalised in 1824 by Sir William Hillary, the RNLI long predates the ambulance service or police.

The RNLI is a national operation, the day-to-day reality at each of its 224 lifeboat stations is intensely local. The almost tangible esprit de corps that comes from being part of a team that rescues more than 6,400 people a year is really local allegiance and pride.

I have long argued that we should use the RNLI as a model for many of our other institutions.

Reciting the virtues of the RNLI, I wonder if we could not use volunteer bodies to do far more? One problem might be a certain fatigue in fund raising, however it would not be difficult to adapt the tax rules to encourage us to donate far more and more easily.

Endless dissertations have been written about conventional firms. They are all fascinating. But how much more intriguing to examine the RNLI, this survivor from the 18th century. At that time, the leaders of the Scottish Enlightenment has subverted the notion the state could do anything better than local communities. Nowadays, the near-universal view seems to be that only official intervention can be the correct policy.

Beyond the demonstrable measurement of lives saved and communities enhanced, it is worth examining how the RNLI raises its money without knocking on the Treasuryâ€™s door. The funding of the RNLI enhances my admiration further. It receives Â£12 million each year from charitable fund raising activities, Â£8m from donor "members" and, most arrestingly, Â£60m each year from legacies. I know it is in my will and I have persuaded friends to follow that lead.

Their HQ confirmed there is a slight bias towards those living near the shoreline in making these bequests - the need is more vivid - but the organisation claims it also has supporters among those who never see the sea.

I hope I have not pictured a team of mere amateurs - they are proud of their excellent seamanship and polish the gear and practice their drill with Ã©lan. The crucial difference is the voluntary nature of this institution. The RNLI deserves closer scrutiny. It may represent a "business model" we could apply in many other areas of life.

What a comedy if the Scottish Parliament had to fund its money-wasting building programme by voluntary subscription like the lifeboats.

What would happen if the RNLI was nationalised and run by the civil service? My guess is its budgets would increase tenfold and its HQ would move to central London. The volunteer element would evaporate and soon weâ€™d read stories about manning disputes, differentials, French leave and pensions. This is not theory. Just look at our fire brigades.

John Blundell is director general of the Institute of Economic Affairs.


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