Thursday, 18 December 2014

Libraries to Blame for Recession



Clearly it can now be revealed that the main cause of the great financial crash of 2008 was the fact that we had too many libraries. Thank goodness the government has bought this scourge under control and has now turned the tide both in the number of libraries and the numbers using them.

The huge unregulated financial institutions speculating in complex derivatives which many of them did not understand have had to be bailed out with huge quantities of taxpayer’s money due to the reckless lending of too many books by public libraries.

Clearly access to the unfettered lending of books has to be bought to a halt. This unsecured lending encouraging reading and education has done untold damage to our nation. Who knows what the scale of the problem could have been if we had a well read literate population. 

Fortunately we are now imposing some serious restrictions on library lending, by closing libraries altogether where possible and restricting the opening hours of the remainder. These timely actions should bring a halt to unfettered reading.

This seemed to be the sub-text to George Osborne’s Autumn Statement. Of course it is not just libraries that are to blame but the whole of our public services.  He and many of his supporters in the media seem to have been convinced that that the initial crisis was caused by irresponsible public borrowing.

Never let the truth get in the way of a good story. The conditions for crisis were created by a system of production that goes on strike whenever there are insufficient profits. This was hidden by excessive private sector borrowing and lending in particular by over-leveraged banks.

Eventually profits from credit-fuelled speculation in the stock market and in property, using financial instruments of mass destruction ceased to deliver. The collapse of this bubble led to massive falls in output and therefore in tax revenue.
Government deficits are a consequence not the cause of this mess. When the real estate bubble burst corporations and banks slashed spending in an attempt to pay down their debts. Perfectly rational but just like in the 1930s self-defeating, profits continue to fall. Falling profits have lead to a private sector investment strike.
The resulting investment collapse has lead to an economic depression that has worsened the public debt. At a time when the private sector is engaged in a collective effort to spend less despite in many cases sitting on huge piles of cash public policy should not be making things worse by big cuts in government spending (or big increases in tax rates on ordinary people).
After doing the right thing in rescuing the banks that caused the economic crisis conventional policy wisdom has quickly switched the focus onto government deficits. The result is that fiscal policy is reinforcing the dampening effects of private sector spending cuts. Monetary policy cannot solve this problem as interest rates are close to zero besides the problem is the profitability of the private sector not the lack of credit.
It is not even the right policy to propose a medium-term plan for reducing the government deficit as Labour has done. Based on cuts and tax rises as it is front-loaded and will further delay recovery and be self-defeating, indeed the IMF has studied 173 cases of budget cuts in individual countries and found that the consistent result is economic contraction.
There have been a handful of cases in which fiscal consolidation was followed by growth but this was due to currency depreciation in a strong world market. Current global economic conditions make this scenario highly improbable.
What is needed is more public investment not less. Only investment can increase productivity and growth and in this equation the government deficit is irrelevant.
In the Autumn Statement Osborne was crowing about the level of our economic growth (let us park for a moment how this largesse was shared across the population). When we break this down we can see that there where some extraordinary factors driving it. The corrupt bankers paying back to their customers £23 billion they had fraudulently received in “mis-sold” PPI insurance, the adoption of the new European national accountancy standards which include the growth in prostitution, illegal gambling and drug dealing and of course all the extra borrowing.
Bizarrely it is only the latter Osborne finds offensive or indeed immoral. Even with crime and corruption on the increase growth for next year is predicted at being lower than this.
Some of my old Labour friends have accused me of being too hard on Gordon Brown and too soft on Osborne. Brown was well meaning but misguided, Osborne is a sociopath. For me there is a clear distinction. Of course Labour is better than the Tories but I fear the danger with Ed Balls economic strategy is that Labour will do a “Francois Hollande” promise little and deliver less inadvertently opening the door to the far right.


So Farewell Gordon Brown!



As Gordon Brown disappears into the dustbin of history as the man who saved the Union it is appropriate to take a look at his significance. There is no doubt that he was both the architect and builder of New Labour’s economic policy which has been so difficult for Ed Miliband to shake off.

This is probably because he has persisted in dragging the dead weight of Ed Balls around with him. Balls not only represents the Brown legacy but offers little hope that Labour has learned anything from those years.

My own view is that history will be much kinder to Brown the Prime Minister than to Brown the Chancellor. This is probably the exact opposite of the popular perception. Brown the Prime Minister may have offered up a Freudian slip in the Commons when he said he had “saved the world” but to a large extent he had.  When the banks teetered on the edge of collapse in 2008 he did the right things in saving the banks and putting up taxes.

It is worth remembering that the economy was returning to growth before George Osborne put the brakes on with his first emergency budget and derailed the whole process destroying billions of pounds in lost output.

That is only a small part however of Brown’s record. He was a slavish supporter as Chancellor of Alan Greenspan who for 18 years was boss of the US Federal Reserve. The man who finally admitted when the Banks where collapsing that he had found a flaw in the theory.  A flaw that had been obvious to most of us for years.

Having pursued policies of deregulation and liberalisation Greenspan had now found "he made a mistake in presuming that the self-interests of organisations, specifically banks and others, were such that they were best capable of protecting their own shareholders and their equity in the firms”.

In pursuing the same policies and making London a safe haven for rogue global capital Gordon Brown turned the City in to the world’s largest tax haven.

One of his daftest ideas and one the establishment continue to praise him for was making the Bank of England “independent”. One of the greatest triumphs of the post-war Labour Government was the nationalisation of the Bank of England. The idea that the policies pursued by the bank can somehow be de-politicised is fatuous. At this level economics is politics.

What’s more an independent bank for years kept UK interest rates higher than those in mainland Europe doing untold damage to Britain’s manufacturing sector. Brown managed to destroy one and half million manufacturing jobs in the process.

As well as liberating the City and the Financial Services sector to do its worst his next crime was the way he structured the welfare state to create a set of subsidies to the private sector. His complex web of in-work benefits kept workers trapped on low pay and subsidised bad employers. Simultaneously housing benefit grew as private sector landlords had a field day ratcheting up rents to milk the subsidy.

What’s more because ordinary people received next to no benefit from his largesse they did not thank him at the ballot box for this spending.

There are other examples the way that private sector provision of care for children and the elderly has fallen in quality and risen in cost. A week does not go by without some scandal in these private services. He was truly naive in thinking ownership did not matter and you could use regulated markets to achieve better services for the public.

Clearly Blair and Brown both had a malign influence in the Labour Party he was ruthless in rooting out any opposition to his policies and spent an inordinate amount of time jousting with Blair in placing his cronies in safe parliamentary constituencies.

It is clear now that the golden years of Brown’s Chancellorship can now be seen as being funded by fool’s gold. The entry of China into the world economy reducing the costs of manufactures and ushered in a period of low inflation and individual spending was funded by a tsunami of debt. Rather than abolishing “boom and bust” he facilitated it.

Tuesday, 4 November 2014

Unity is Strength



You don’t hear much about Wakefield. The Rugby team, Trinity, haven’t won much since the early sixties. Their old Belle Vue ground formed the backdrop to that cracking film This Sporting Life probably the best sports film ever made.

Wakefield has at last got something to cheer about. It is undergoing a cultural renaissance. It began with the opening of the contemporary art gallery, the Hepworth, the name is taken from one of the city’s most famous daughters, Barbara Hepworth, that giant of post-war sculpture. That may come as a surprise unless you know that Wakefield is home to the iconic Yorkshire sculpture park.

Opening in 1977 its 500 acres of open air galleries includes works by both Hepworth and that other great Yorkshire sculptor Henry Moore. The renaissance continued with the opening of Wakefield One the new council emporium which included a new library opened by Jarvis Cocker in 2012 and a new Museum opened by David Attenborough in 2013.

Personally I preferred the old museum building and I don’t like the way the council talks about the citizens of this great Yorkshire City as customers but hey a new library at a time of austerity cannot be a bad thing.

Another well known Wakefield venue is the category A prison which is the home of some of Britain’s most dangerous criminals. Being a prison officer does not mean however that you are conservative. Wakefield’s officers have a very radical past as they where responsible for founding the Wakefield Industrial Co-operative Society back in 1867.

The society grew quickly and by the turn of the twentieth century was ready to expand its central premises. Following a design competition Abraham Heart of Wakefield won with his vision of Unity an intriguing mixture of gothic and Flemish architecture. The extension took three years to build and included a magnificent hall.

I am sure that an architectural critic would tell us that this building is a jumble of styles full of ornate craftsmanship, glorious stained glass and chock full of co-operative symbolism. This building should not work but somehow it does.

Sadly in recent times a place for everything from silent movies, to wrestling, symphony orchestras to ballroom dancing was in a terrible state of repair. The venue for so much of Wakefield life looked like it would go the same way as the Wakefield Co-op Society.

That is why I am so pleased that the icing on the cake of this cultural rebirth is that of Unity Hall. Forty years after the Wakefield Co-op disappeared the building was taken over by the local authority but only partially used then in 1994 the council sold the building then for a few years it was used as a place for music students to learn their trade.

It was still a music venue during the late 1970s and early 1980s; it attracted some of the biggest acts in the glam, punk, post-punk and heavy metal era. The Specials, Boomtown Rats, Human League, The Skids, The Only Ones, Iron Maiden, Penetration, Eurythmics and Def Leppard had all strutted their stuff at Unity Hall.
In this era its claim to fame is as the first place The Pretenders ever played. Unity Hall, 1978 supporting Wakefield power-pop band Strangeways, is one for the rock history books.
Fans who had loved these gigs and the place and seeing the state it was in began to try to save it. What turned these aspirations into a serious project was Chris Hall. He was a consultant on property developments but realised that there needed to be a new way of developing cultural businesses through co-operatives.
He started working on Unity Works, the name for the redevelopment project in 2010 and created the co-op that could deliver what everyone wanted the following year, becoming the Development Director and Chair.
Since 2011 when a Community Benefit Co-op was established, with membership/shares at £200 each working in partnership with the City Council they put together a £4.4million scheme to completely reclaim the hall.
It has worked and they have done a magnificent job. The venue is amazing with a 600-seater major hall and 150-seater minor hall. The renovation has uncovered many original features such as floor mosaics, the incredible roof in the main concert room and even an original lift sign.
As well as a terrific concert venue, it has office space, an art gallery, independent retail space and conference facilities. The work is not quite complete. Phase two will see a bar and café, expected to open in December.
This month the Year Zero festival saw the Damnned return to the stage of Unity for the first time since 1981.  This old venue is better than ever and very much alive and kicking. And here is one for all our diaries, Remembering the Miners Strike, a day-long national event supported by the Orgreave Truth and Justice Campaign and the NUM ay Unity Works on 7 March 2015.
This building now looks great a combination of the best of the old and the new and it has made one old co-operator very happy that an iconic co-op building has been co-operatively saved and put into co-operative use!

Sunday, 12 October 2014

Co-operative Folk Lament World War One



I had a fabulous time at the Derby Folk Festival. At one point it did not look like it would go ahead, after a fire at the Assembly Rooms, however a large marquee in the market place saved the day.  Bill toppers included Steeleye Span, Show of Hands and Kate Rusby. Lower down the bill however there where some real showstoppers including an outstanding performance from the wonderful Martin Simpson and a lovely laid back slot from Americans Dana and Susan Robinson.

The most moving performance by a long way however was that of In Flanders Fields by vocal trio, Barry Coope, Jim Boyes and Lester Simpson. They have been stalwarts of the festival for a long time and one of my personal favourites. That is not just because they release their music on the co-operative No Masters Voice label their vocal harmony singing is sublime and they combine a mastery of the genre with tremendous wit and biting social commentary.

The folk world generally has produced some of the best musical offerings to mark the centenary of the First World War and as you would expect from folk artists generally from the bottom up. Rob Johnsons with Gentle Men his family history of the war to end all wars is very good indeed so is Show of Hands Centenary a mixture of song and poetry from the period.

Coope ,Boyes & Simpson’s is a very substantial piece of work it is both moving and funny and  marks a twenty year collaboration not only with the history but the place of Flanders itself. Piet Chielens, Co-ordinator of the In Flanders Fields Museum in Ypres argues that they have been at the forefront of the commemoration in the West Flemish Front Region for twenty years. Their body of work on the war can be seen as a “lieu de mémoire”.  Indeed in Flanders, he says, no artistic initiative seems to have been more successfully involved with the theme than that of this trio.

In their show they bring together eye-witness accounts, contemporary poetry and songs specially commissioned for the town of Passchendaele’s Peace Concerts. The albums title, In Flanders Fields takes its name from the poem written by John McCrae who was killed on the Western Front in the First World War. Ironically the poem was used in army recruitment and its references to poppies made them an important part of later commemoration. 

In the live shows the pieces between the songs are as well chosen as the songs themselves quips from contemporary music hall song, to extracts from the Ypres Times, the satirical paper produced by the soldiers in the trenches, as well as poetry and letters home.

They give voice to the poor bloody infantry and their contempt for the sergeant majors and officers. Never afraid to prick the bubble of the pompous they create a rounded image of the war that is deeply moving.

Visiting Belgium for twenty years changed the life of Jim Boyes in particular who now lives there. Going over regularly since the 70s, but by becoming involved in Peace Concerts Passchendaele, he got to know a lot of people in Belgium and it soon became his second home.
His involvement with the Flemish folk scene began when he had released a solo album called Out The Blue, it was the first thing he had done on the co-operative No Masters label which he had set up with John Tams.
Piet Chielens who wrote for the Flemish folk magazine called Gandalf had known of Jim since his time in Swan Arcade. He reviewed the album which contained a song Down On The Dugout Floor that he had written after a visit to play the Dranouter Folk Festival, near Ypres.
When Piet started the Peace concerts he invited Jim to go over and play with some Flemish musicians. Once there he was asked if there was anyone else that Jim would like to involve. He had just started working with Barry and Lester eventually they took part in five different Peace Concert productions in Belgium and England, performing on former battlefields like Hill 60, among the memorials at Tyne Cot and at the request of the town of Passendale for their eightieth anniversary commemoration of the battle.  Many of these performances are now contained on In Flanders Field also working with Piet there is also an impressive book to go with the two CD’s.
At Derby they mocked the Guardian’s description of their work as post-modern folk. More like ‘post-mortem’ they said. Sadly there is nothing post about this work, as we embark on another war, it is strikingly contemporary.
This work is beautiful, funny, passionate and angry and a terrific antidote to much of the jingoism that marks the centenary. They argue that, “the more we learn about war, the more important it becomes to sing about peace.” Get to see them perform if you can and lets hope that’s what everyone who hears them learns too.







Onward and Upward



I was enjoying reading Britain’s Communists the Untold Story by John Green where he seeks to correct the malign mainstream account of the contribution that Communists have made to British life.  At one point he talks about how authors who where members of the party are now remembered despite their party affiliation or because of their subsequent anti-communism.

In the latter category he places Edward Upward. Now Edward was a member of the party for sixteen years from 1932 until 1948 but left because he felt it no longer to be a Marxist Party and irretrievably reformist.

You may disagree with Edwards’s assessment but this does not make him an anti-communist. Edward was a very distinguished author who mingles surrealism with realism to create incredibly vibrant novels and short-stories.

He had an extraordinarily long life living until he was 105. In his youth he began a life long friendship with Christopher Isherwood knew Auden and Virginia Wolf with his early work being published by the Hogarth Press.

In 2009 that “drink soaked former Trotskyist popinjay” (according to George Galloway anyway), Christopher Hitchens went in search of Edward who was hiding in plain sight on the Isle of Wight after his retirement as a school teacher. During his teaching life he remained politically engaged undertaking editorial work for Ploughshare, the journal of the Teachers' Anti-War Movement.

The encounter between Edward and Hitchens was published in Atlantic Monthly on appropriately the 1st May, 2009.

In a vicarage-style house not far from the railway station in the small town of Sandown, Upward received me and led me to a side room. He explained without loss of time that the main rooms of the little home were out of bounds because his wife, Hilda, was in the process of dying there. “I shall miss Hilda,” he said with the brisk matter-of-factness of the materialist, “but I have promised her that I shall go on writing.” Attired in gray flannel trousers, a corduroy jacket, and a V-neck jersey, he reminded me of something so obvious that I didn’t immediately recognize it. On a table lay the Morning Star, the daily newspaper of the Stalinist rump organization that survived the British Communist Party’s decision to dissolve itself after the implosion of the Soviet Union. It is entirely possible that Upward was the paper’s sole subscriber on this islet of thatched cottages and stained glass and theme-park rural Englishness. Seeing me notice the old rag, he said, rather defensively, “Yes I still take it, though there doesn’t seem much hope these days.” When I asked him if there was anyone on the left he still admired, he cited Arthur Scargill, the coal miners’ thuggish leader, who was known to connoisseurs as the most ouvriériste and sectarian and demagogic of the anti-Blair forces in the Labour movement. Yet to this alarming opinion he appended the shy and disarming news that the last review he had had in the Morning Star had been a good one, precisely because it stressed that not all his work was strictly political. “It particularly mentioned my story ‘The White-Pinafored Black Cat.’” I inquired if he was working on a story at that moment. “Yes I am.” “And may one know the title?” “It’s to be called ‘The World Revolution.’” At this point and in this context, I began to find the word surreal recurring to my mind.”

I think Edward comes out of this encounter rather well whilst Hitchens confirms George Galloway’s assessment. Edward does not sound anything like an anti-communist although Hitchins most certainly does and one wonders what the true purpose of his journey was.

In recent years Edwards work has been published by Enitharmon press who have issued a series of critically acclaimed stories as well as memoirs of Isherwood and Auden.

Probably his greatest work was the trilogy, The Spiral Ascent, (In the Thirties, The Rotten Elements and No Home But the Struggle) described by the Guardian as, “without doubt Upward's central work; unfortunately it is also the most misunderstood, and today it languishes out of print.” It is a indeed a remarkable work and fortunately it is relatively easy to get second hand copies.

One of his characters in the short story, A Ship in the Sky (from the Unmentionable Man, Enitharmon, 1994) has an encounter with a fellow passenger on a ship,
“And why do you think you are lucky to meet me?”
“Because my closest friends and I have always admired you as one of the very few left-wing imaginative writers of literary ability who have not betrayed their principles.”

Sounds like the perfect epitaph to me.

Little Co-op Vesus the Evil Empire



One of my favourite co-ops is Revolver based in Wolverhampton. Paul Birch the inspiration behind it has had a long career in the music business and came to fair trade sourcing fair trade cotton for bands T-shirts.

Paul felt that the new found desire for provenance in coffee played to the fair trade agenda in a new way. The need to identify the region or even estate the coffee had come from meant you could ensure higher quality and have a real relationship with the producers.

His second idea was that fair trade was not fair enough. If Nestle or Wal-Mart could get the fair trade logo on their products it was far too easy!

So what was to be done? Well if you formed a co-op with membership available to both producers and consumers you could make the connection that the original idea of fair trade was meant to be all about.

So far so good. The business was growing steadily in a very competitive market place when the chance arose to include Cuban coffee to the range.

It was crystal mountain coffee grown by some two hundred farmers around the Sopapo-Mayare plateau in the Cuatro Vientos region, nestled in the valleys of the Sierra del Escambray Mountains frequent rain produces a perfect mico-climate. The soil rich in mica and quartz crystal deposits gives the coffee its name.

The coffee cherries are handpicked and naturally sundried before being bought to Cumanayagua for processing it has a highly intense aroma with an elegant and delicate sweetness.

Following meetings with the Cubans and a visit to Cuban this soon became their best seller. Unsurprisingly when you taste its rich, strong and rounded flavour with very low acidity - perfect for after dinner by ensuring that the coffee was lightly roasted as much of this magnificent flavour as possible was preserved.

Demand for this magnificent coffee had been growing steadily. Like many small businesses internet trading has been a real boon. Then a customer trying to pay for some Cuban Coffee online through paypal received an email it began, “Paypal’s Compliance Department has reviewed your account and identified activity that is in violation of United States regulations administered by the Department of the Treasury’s Office of Foreign Assets Control (OFAC).”


It went on: “It has come to our attention that you initiated a payment for the purchase of an item of Cuban origin. To ensure that future activity and transactions comply with current regulations, PayPal is requesting that you complete the following appeal step: Agree to no longer undertake activities in violation of laws, regulations and rules as outlined in PayPal's User Agreement .  Any further violations will result in the closure of your account. As a result of the violation, details of your account and the transaction have been reported to OFAC.”

Anyone who doesn’t know, as they didn’t at the time the, Office of Foreign Assets Control of the US Department of the Treasury enforces economic sanctions based on US foreign policy and national security goals against targeted foreign countries and regimes, terrorists, international narcotics traffickers, those engaged in activities related to the proliferation of weapons of mass destruction, and other threats to the national security, foreign policy or economy of the United States.”

A British company being paid by a firm based in Luxembourg selling Cuban coffee is perfectly legal. But often bigger firms often give up at this point because they want to do other business in the US. These extraterritorial sanctions are holding Cuba back.  Then came their second set back. One of the companies which had been distributing their coffee to retailers in the midlands particularly to retail co-ops went bust owing them money and breaking the supply chain.

A less resilient group of people could given up. Finance frozen supply chain bust. This was a very serious setback. However they are made of sterner stuff.

They arranged to sell the coffee through the Cuba Solidarity website (where you can get the ground and beans). They spent months getting their pay pal account unfrozen and they are rebuilding their web site.

Now working with the Cubans they are looking at importing and marketing other commodities, including rum, honey and beer. There is no doubt that these issues have damaged the business but it is still standing and being a threat to the United States is a real honour. To grow and take support for Cuba to a new level they really need more member investors. Their experience has made them more determined to succeed than ever!

If you want to help break the embargo and get a great cup of coffee go to: www.Revolverworld.com and note members get free delivery!

Friday, 15 August 2014

The Forward March of the Co-op Halted?

2012 was a great year for the Co-operative Movement. The United Nations had designated it as the International Year of the Co-operatives, Dame Pauline Green President of the International Co-operative Alliance addressed the United Nations and UN Secretary-General Ban Ki-moon reminded the world that,  “Co-operatives are a reminder to the international community that it is possible to pursue both economic viability and social responsibility.”

Co-ops UK and the Co-op Group rose to the occasion with a major conference and Expo in Manchester called Co-ops United (apologies to City fans). Even David Cameron was swept along by big society rhetoric and agreed to support one of the objectives of the Year, governments’ consolidation of Co-op legislation through a new Co-operatives and Community Benefits Societies Act.

Corporate capitalism was on the ropes the co-operative and mutual sector had weathered the banking crisis and was growing. Entering 2013 Co-ops had never had a more favourable press in the publics eyes we where a ‘good thing’.

Then the sky caved in. May 9th 2013 was the day of reckoning. That day ratings agency Moody downgraded the Co-operative Bank’s debt rating to “junk” status. It said the bank was vulnerable to potential losses and warned it may need “external support” if it could not strengthen its balance sheet.
The Bank said it was “disappointed.” As the Banks chief executive, Barry Tootell, resigned and Project Verde, the bid to buy 631 branches from Lloyds, collapsed.
The enemy was inside the gates, US Hedge Funds, described as “vulture funds”, Silver Point Capital and Aurelius Capital Management now had significant stakes in the Bank, they had their chance to do to the Co-op what they usually did with the distressed assets of developing economies.
Moody’s, ever helpful in these matters, said that the Bank will be forced to “take the axe” to costs. For a bank this was not new. The rest of the banks have had to be recapitalised some even taken into public ownership. But the banking environment had dramatically worsened ultra low interest rates having destroyed the margins in retail banking.
Some of this crisis had of course been caused by the bankers themselves, by their ridiculous growth strategies, reckless lending and of their taking risks on products they did not understand, in a mad greed driven feeding frenzy.
That is not to offer an excuse. We where supposed to be different, we had encouraged people who had an ounce of ethics to “switch their money”.
Now thanks to the effective demutualization of the Bank and the exposure of the private life of its chair the ‘Crystal Methodist’ Paul Flowers that switching was going in the wrong direction.
As Professor Johnston Birchall has said, “when a conventional investor owned company fails people ask why it failed. When a co-operative fails, people ask whether co-operatives can ever be made to work.”[1]
This debacle created a new industry - an investigation industry. Externally, the Co-op Group is now subject to regulatory investigations by the Financial Conduct Authority, the Prudential Regulation Authority and the Financial Reporting Council. The failure of the Bank has also been the subject of Treasury Select Committee hearings, and then there is the independent review by Sir Christopher Kelly commissioned by the Group.
Before any of these bodies could report we found ourselves in the Alice in Wonderland position of, “verdict first, evidence later”.
Since the collapse of the bank and its recapitalisation there had been a clean sweep of the management following the retirement of Group CEO Peter Marks who was replaced by former Kingfisher plc Chief Operating Officer Euan Sutherland.
He quickly recruited a completely new management team who wasted no time in calling for a review of the organisations governance. In the process appealing over the heads of the board and elected members to individual members through a strange opinion poll run by You Gov asking customers and members to “Have your Say”. This was such a crude piece of polling that it was quickly seen through by pundits and activists alike.
Sutherlands view seemed to be there was no time to waste and the governance of the Group was at fault and had to be reformed.  Lord Myners was made a Senior Independent Director of the Group and asked to lead, “an independent review of the Group’s governance.”
Now this is not completely ridiculous as Myners had previously lead a review of the governance of life mutuals (to which incidentally the Co-operative Insurance Society had submitted evidence – pointing out, “The co-operative model of trading is particularly conducive to strong corporate governance in that it involves democratic participation by customers.”)
There is no doubt that governance in large organisations is a concept with several strands. Clearly there is the question of the structure of the organisation, is there something inherent in large scale co-operatives that makes them difficult to govern?
Was there a healthy culture at the Group ie was there an open and respectful relationship between those who represented the interests of the members and the professional management?
Finally what of the qualities of the key personnel, the senior executives of the Group and the Bank and the lay chairs of the Bank and the Co-op Group?
Seems odd that Myners should begin before Sir Christopher Kelly, former chair of the Committee for Standards in Public Life had concluded his report. As his job was to look at the trail of poor decisions that lead us to this situation “to look at the management structure and culture in which those decisions were taken; lines of accountability which governed those decisions; and the processes which led to them” and “To identify lessons which can be learnt to strengthen The Co-operative Bank and the wider Co‑operative Group, and the co-operative business model generally.”
Seems like cart before horse to me.

The year all this was going on the Co-operative Wholesale Society (CWS) had celebrated its 150th birthday and the occasion was marked by a splendid book Building Co-operation[2]. The first business history of the Group is an impressive piece of scholarship as the CWS is one of the best documented businesses anywhere in the world.

In all that time there has never been anything quite as extraordinary as the current crisis. Yet like all long history if you look carefully, as Marx pointed out, it does tend to repeat itself.
The obvious precursor was the collapse of the Scottish Co-operative Bank in 1973.  The bank had been investing in what where called Sterling Certificates of Deposit without the full knowledge of the board of SCWS. When it was clear that it could not meet its obligations and no other bank would lend to it a quick marriage between the SCWS and the CWS was arranged and over 100 years of independent trading came to an end in just a few weeks.
Needless to say prior to the collapse of the Scottish Bank the SCWS marked its centenary with a new headquarters building opened in 1968 by Her Majesty the Queen. Today the building houses Glasgow Council Offices.
Many of us attending recent Co-op Group Annual and Half Yearly meetings had been watching the construction of 1, Angel Square, the Co-op Groups new palatial headquarters, with a degree of trepidation. Such aggrandisement was a sign of hubris by a Chief Executive and almost always spelled disaster.  Also to be opened by the Queen it became subject to a sale and lease back described by Lord Myners as an expensive addiction.  Yet even the most cynical of us could not imagine the disaster that was to come.
Today’s crisis is the biggest since 1997 when the Lancia Trust attempted to take-over and demutualise the CWS backed by such City luminaries as Hambros, Schroders and Nomura.

That time we fought them off and in so doing learned lessons that sparked a revival based on two things a common brand and a degree of consolidation. The branding was effective, meaning that travel, pharmacy, funerals, food, insurance and banking where all clearly part of the same business. The idea was to encourage cross selling and reduce marketing costs.

Consolidation was another story. If any one individual is associated with this drive it was the former CEO Peter Marks who argued for a single national co-operative society. His climb to the top was thanks to a series of society mergers rising from CEO of Yorkshire Society via a merger with United Co-operatives to CEO of the Group when United in turn merged with the CWS.

Many people had misgivings in the way elected members had been persuaded to support these mergers with large pay-offs for loss of office. Grudgingly most commentators felt that at least the Co-op was at least back on the map. Mergers had bought some efficiency savings but Marks thought the Group was still too small to compete effectively with its rivals.

Building Co-operation has a section on Marks and the ‘Renaissance’ in retrospect the word is quite rightly hedged. Len Wardle became group chair in 2007 and Marks CEO in 2008. The authors argue that Wardle offered Marks ‘constructive criticism’.  It is hard now to see anything constructive about this partnership.

Absorbing retail co-op societies into the Group was one thing but now the target was non-co-op businesses. His predecessor, Martin Beaumont, had looked at the acquisition of the Somerfield Group (also an aggregation of other businesses including Kwik Save) and ruled it out as too difficult to absorb. Marks and Wardle had no such fears and in March 2009 they paid £1.57 billion to make the purchase.

Euan Sutherland before he left in huff after his exorbitant pay had been revealed told us that this year the Group will lose over £2billion. Mostly it would appear from ill judged acquisitions which according to Paul Myners are “breathtakingly value destructive” one of those was the purchase of Somerfield.

The biggest act of value destruction however was the Co-op Banks merger with the Britannia Building Society. The public pillorying of elected Paul Flowers has masked a key issue in that failure - the role of mangers and the Myners favoured independent non-executive directors (IPNED’s).
The Co-op Bank has never been a co-operative it began life as the Loan and Deposit Department of the CWS back in 1872 and ninety-nine years later it became a plc and a subsidiary of the Co-op Group.
The Directors had never been elected. They where appointed by the main Group board and to overcome any skills gaps in recent years they have included IPNED’s from the financial services and banking industry.
Of the appointments there was a minority of elected members. The annual report for 2012 states, “Of the 11 Non-Executive Directors four are elected members of the Co-operative Group Board, two are Co-operative Group Executives and five are independent and recruited for their specific financial services experience and expertise.”
All the key roles on the operational sub-committees of the board where taken by banking professionals of some standing. The Chair of the Risk Committee which had responsibility for “the management and control of all significant risks, including technical, operational, business model and external risks”, was Merlyn Lowther.  Her name maybe familiar you may have her signature in your wallet. As chief cashier of the Bank of England her signature was on our bank notes for four years.
Other Board members included Peter Harvey ex-chief executive of UK Business Banking at Barclays and William Hewitt ex-Group Finance Director of the RAC who was chair of the Audit Committee.
Then there are the external auditors KPMG who gave the Bank a clean audit including a review of their corporate governance statements by Andrew Walker an Audit and Transactions Services partner in KPMG’s Financial Services practice. 
The man who facilitated the merger with Britannia, was Tim Webb of J.P. Morgan Cazenove. Tim is an exceptional banker it says on their website. He represents “the stability of our management team and the depth of talent that allows us to maintain consistent service to clients year after year”.
That deal was a disaster. What ever political pressure there was it is clear now that something needed to be done about Britannia and the Nationwide could not swallow any more failing building societies. The Co-op Bank was a prudently run fairly boring bank indeed there was a time when the board had consisted solely of completely risk averse elected members.
Britannia was loaded with all sorts of toxic debts in both residential and commercial property. The new CEO of the combined business was Neville Richardson the former CEO of Britannia making it a sort of reverse takeover. Peter Marks the Co-op Group CEO determined to grow the business by acquisition at apparently any price.
With both the bank chair and the Group chair captured the stage was set for the step too far that finally bought the Group to its knees Project Verde. Collectively these bad deals have left the Group carrying far too much debt. The danger is the Group would no longer be owned by its members but by the banks or worse the same bond holders who prized open the Bank. Reducing the debt is the key challenge.

Academic’s attribute co-op failures to three key factors, “badly thought out business strategies, paying too much for acquisitions, and boards being out of their depth.”

They rarely point to the ‘over weaning CEO’ or non-co-operative managers. But that is what I think is the real problem here. Co-operative governance relies on mutual respect and understanding between professional managers and representatives of the members and a common set of values.

Sir Graham Melmoth an earlier CEO of CWS publicly stated that, “Peter Marks would not know a co-operative principle if it crept up and hit him in the face.”
As a former President of the International Co-operative Alliance he was in a particularly strong position to make that statement. Whilst he was CEO he instigated a co-operative values and principles programme – developed and run by the Co-operative College – for all senior managers. Sadly that programme was allowed to lapse when leadership in the CWS changed.
Surely such training in co-operative identity should be mandatory for all in leadership positions – be they managers or elected representatives of the membership. This gap is perhaps one of the factors in the governance failure.

I would argue that there has indeed been a failure of governance at the Co-op Group but it is not as simple as the one put forward by Lord Myners. The failure is much more comprehensive and systemic.

It includes the whole purpose of the business, the relationship with members and their representatives and the management. There is a critical crisis of co-operative education which has failed to produce elected directors or managers with the qualities or of the quality to run a large scale co-operative business.
This argument has been best expressed by Peter Davis in his work on Co-operative Management.[3]  When the Co-operative Bank was under the leadership of Terry Thomas with his Inclusive Partnership plus Sustainability model of management he was offering us a model of a co-operative value based management.
His philosophy focused on membership as the key. He recognised the social mission at the heart of what being a Co-operative really means and demonstrated how with good market research it could be re-interpreted for the modern age. In so doing the banks advertising and branding did not simply reflect what members wanted and this is the key point - it enlarged what they wanted, it educated them. 
All the surveys that put the Co-op at the top of any ethics survey are the legacy of this period. Not only did this recreate the co-operative brand it generated record surpluses to the CWS/Group keeping the whole retail movement afloat at a critical time.
Once he went however the rot set in. The ethos faded. We had lost the Co-operative Bank long before the hedge funds got their talons into it.
This is the real tragedy. The Co-operative bank the only real post-war success the movement had has been wiped out by a mixture of charlatans and poorly educated idealists.
Is the situation recoverable? Mondragon which until recently was roughly the same size as the Co-op Group has its own University. Across Europe there are institutions delivering the new co-operators as far apart as Italy and Finland  
This year the Co-operative College will be incorporated and able to redevelop itself. The mission we have is to rebuild co-operative education, this will not be cheap but it is a vital investment, without the necessary skills, firmly rooted in co-operative values, we will be doomed to repeat this cycle. We have to do this, build a co-operative organisational culture ourselves as there is no one else to do it. Otherwise we will simply keep re-infecting ourselves with the same alien and fundamentally non-co-operative culture.
The last generation of co-op mangers to come from the old home of the College at Stanford Hall included Ursula Lidbetter of Lincolnshire Co-operative Society and current Group chair. Maybe that is a small glimmer of light.


[1] The governance of large co-operative Businesses, Johnston Birchall, Co-operatives UK, Manchester, 2014
[2] Building Co-operation, John F. Wilson, Anthony Webster & Rachel Vorberg-Rugh, OUP, Oxford, 2013.
[3] Co-operative Management, A Philosophy for Business,  Peter Davis & John Donaldson, New Harmony Press, Cheltenham, 1998.