Monday, 23 February 2009

Fair Trade? It's Just the Start!

We have a lively African Studies Centre, at Coventry University, bringing together students and teachers from across that great continent. Meeting them makes it harder to accept the terrible poverty many of them have left at home.

Africa never was a dark continent it is full of light and colour, rich in agricultural, human and mineral resources together with immense cultural riches in art, literature and today especially music.

Despite these riches the continent has been unable to escape the clutches of neo-colonialism, what Kwane Nkrumah called back in 1965, “the worst form of imperialism. For those who practice it, it means power without responsibility and for those who suffer from it, it means exploitation without redress.”

Escape from former colonial powers Britain and France, and newer ones like the United States or as is common today China is difficult. The rich countries argue that the solution to breaking the bonds of dependency is free trade.

Gordon Brown, even at this time of global economic crisis, has called for a revival of the Doha trade round. Rich governments make huge claims for trade reforms. Closer inspection invariably reveals the reason. They are the big gainers, whilst there is some trickle down to the poorer countries, the very poor get next to nothing.

How can trade liberalisation of itself help an isolated African village? For sustained economic growth yes poor counties need to increase their exports to the rich countries gaining foreign exchange so that they can invest in the capital goods needed to drive their development and trade barriers can hinder those exports.

But trade reform alone is not enough to lift the extreme poor out of poverty. Even if incomes get raised only a tiny proportion goes to the public investments needed to help them escape the poverty trap.

As global capitalism crumbles with many unsure of their jobs it may not be the best time to ask people to pay over the odds for their shopping. But that is just what many of us will be doing as fair-trade fortnight comes around again (23rd Feb-March 8th).

In a way it is a symbolic event highlighting the injustice of the current world trading system but for those involved its effects are real. FINE the international federation of fair-trade organisations defines it as, “a trading partnership, based on dialogue, transparency and respect, which seeks greater equity in international trade”.

The crucial thing is mutual respect between producers and consumers. For many years the UK retail co-operative retail sector stood alone in supporting fair trade. Despite its own economic weaknesses the concept so fitted with its values that it wholeheartedly supported fair trading initiatives. Even today when for some retailers fair-trade has become a way of increasing margins the Co-op has more fair-trade products in its stores than any other supermarket (and there is 20% off for fair-trade fortnight).

A good example is the conversion of its chocolate range to fair-trade. (Chocolate is a product I am unable to resist) When in the 1990’s thanks to structural adjustment programmes the cocoa market was liberalised Ghanaian farmers faced a grim future. To combat the threat in 1993, they formed a co-op - “Kuapa Kokoo" which in, Twi, means "Good Cocoa Farmers Company".

They sought to capture more of the value chain and having developed knowledge of the western chocolate market, decided to produce their own, branded chocolate bar. In October 1998 Twin Trading and Kuapa Kokoo came together, along with The Body Shop, supported by Christian Aid and Comic Relief, to found The Day Chocolate Company. That autumn, Divine, the first ever fair-trade chocolate bar aimed at the mass market was launched onto the UK confectionery market.

In 1993 it would have been extraordinary to imagine that in just fifteen years Kuapa Kokoo would have some 50,000 members in 1,200 villages, selling 40,000 tonnes of cocoa, turning over more than £20million representing 8% of Ghana’s output and nearly 1% of the world’s. Of course Ghana would have been far better off without structural adjustment programmes and we still need real trade justice but in the meantime Divine chocolate is just that. It can be found in Oxfam shops and as the source it means that the Co-op sells more fair-trade chocolate than all the other supermarkets put together.

More important however is the relationship that has been built between the producers and the consumers based on the principle that the producers should be paid what they need rather than the market rate.

This is just one small step but it is a beginning as Marx said in the Critique of the Gotha Programme “after the productive forces have also increased with the all-around development of the individual, and all the springs of co-operative wealth flow more abundantly—only then can the narrow horizon of bourgeois right be crossed in its entirety and society inscribe on its banners: From each according to his ability, to each according to his needs.”

Wednesday, 4 February 2009

'Times they are a Changin' at the Co-op

As Bob Dylan is unveiled as the new weapon in the Co-ops campaign to show that ‘Times are a changing’ changes continue apace. In December, members of Lothian and the Borders Co-op voted to join the Co-op Group coming quickly after the takeover of Summerfield further enhancing the Groups UK food business.

Now the times are changing in financial services. With the dramatic collapse in confidence of the banks the Co-op and the mutuals have been seen as a safe haven. The proposed super-mutual with the merger of Co-operative Financial Services and the Britannia, the UK’s second biggest building society, creating a new £75 billion business signals the arrival of serious competition for the high street banks.

This merger is possible because of the new Butterfill Act, an act of parliament sponsored Sir John Butterfill MP allowing different types of mutual to merge. Financial mutuals have not been immune to the recession and the credit crunch but so far mergers have been amongst building societies. With some smaller societies coming unstuck in attempts to copy the aggressive business models of former societies like Northern Rock.

The Britannia is not in this category despite this credit rating agencies Moody’s and Fitch have downgraded the Co-op’s position to negative suggesting that the new group will be more exposed to wholesale funding markets. You may think that this is a bit rich coming from agencies that failed to warn of the credit crunch but this deal will weaken slightly the historically strong deposit to loan ratio of the Co-op and increase exposure to Britannia’s larger proportion of wholesale funding. There is little risk however for the 3 million Britannia members who will join the Co-op Group which pays out an annual dividend offsetting any risk to their annual loyalty bonus and it is these members who will be voting on the deal.

Both parties argue this is a merger from strength. Britannia has been a champion of mutuality offering better returns to its members. The new business has the potential to offer an even better service. For Co-operative Financial Services (CFS), formed from, the Co-op Bank, Smile the Internet Bank and Co-operative Insurance, this is good news. There has been some painful restructuring at CFS particularly in the insurance business (CIS) where big changes in adjusting to the world of online and telephone services and fewer home visits led to a number of job losses. Today’s CFS and Britannia make a good fit with remarkably little duplication in the two businesses offering huge potential for cross selling. They are committed to working with all recognised trade unions to effectively manage any changes but the £75 billion merger is projected to generate a modest £60million of cost savings good news for the workers in each organisation.

Britannia CEO Neville Richardson, and proposed CEO of the new Group says that, "This proposed merger offers a unique opportunity to create a new force in British financial services – strongly capitalised and with the scale to offer customers a full range of products and services that are ethical, mutual and co-operative”.

With over nine million customers and 350 branches this will lift the Co-op from a niche player to a high street fixture. Statistically you are more likely to get divorced than to change banks yet even before this merger 2008 saw a 65% increase in customers transferring their current accounts to the Co-op and a 40% growth in retail savings. With banking giants like HBOS and RBS shrinking before our eyes this is a golden opportunity for the Co-op to make a concerted pitch for their customers.

David Anderson Chief Executive of the CFS has described this merger as “transformational not just for the co-operative movement but for the UK Financial services sector as a whole.”

This is going to be a tough year for everyone in financial services but as Andrew Hill wrote in the Financial Times, “Britannia members should not hesitate to vote for the deal. They won’t get a windfall or an upfront payment those days are long gone. Membership of the Co-op offsets any small risk to their annual dividend posed by exposure to deadbeat buy-to-let landlords. Throw in the kudos of being joint pioneers of legislation aimed at bringing different mutuals together and the result is a rare warm glow at the heart of a very chilly financial services sector.”