Tuesday, 19 June 2012

Co-op's in Higher Education

Like co-operators everywhere I was saddened to hear of the death of Elinor Ostrom. Elinor, or Lin, as she was known was remarkable; the only woman to be awarded the Nobel Prize for economics. Her Prize was for her analyses of how individuals and communities can often manage common resources – ranging from activities as far apart as irrigation systems, fisheries and information systems – better than markets or the state.

Her most influential book was the 1990 work, Governing the Commons, in which she examined numerous local management systems overturning the conventional wisdom of resource management. This was the work that lead to her Nobel laureate and Time Magazine, earlier this year, to list her as one of the world’s top 100 most influential people.

I was thinking about her when I attended the Co-operative Education Trust Scotland (CETS) conference, Co-operation and Co-operatives in Higher Education, which bought together teachers, lecturers and students from across Scotland, in the Institute for the Formation of Character, the school founded by Robert Owen, at New Lanark.

Despite the work of great minds like Elinor’s neo-classical economics, has higher education in a death grip. It is like a religion, in the sense that its belief in markets is based purely on faith when all the evidence points in the opposite direction.

Like many abstract ideas they work very well in theory but not only do they not work in practice they simply do not exist. For neo-classical economists co-operatives are a result of market failure and the thing do when markets fail is to make the market work better with yet more liberalisation and deregulation.

The fact is that markets always fail because they are an abstract idea and take no account of the way people actually behave. The only way they can be made to work in the interests of people is by some degree of co-operation. But today co-operatives have almost completely disappeared from the economic text books.

When the subject of economics had its original name of political-economy co-operatives where well represented in the text books with co-operatives being presented in great detail with important contributions from Robert Owen, Proudhon, John Stuart Mill, Charles Gide and the Webb’s.

Come the rise of the neo-classical thinking however and all this disappeared.

The question we have to ask is why? Is it because co-operatives are less important? If anything co-operatives are more important now than a hundred years ago. In the European Union countries co-operative membership to total population is between 20 and 30 % and in North America it is even higher. By any measure the importance of co-ops globally has increased over the period with more members of co-ops than shareholders in private firms, 1.4 million co-ops international employ over 100 million people 20% more than all the transnational companies put together.

Is it therefore ideological? There is no doubt during this time economics has become even more abstract. That early analysis was of economic institutions today the worlds is bent to match the theory with the role of government reduced to getting out of the way creating perfect spaces for markets to operate in eliminating any need for co-operation.

This is why it is so important to get the study of co-operatives and co-operation back into Universities and Business Schools. The complete failure of the pure market model to reflect the needs of the real world means we have a new co-operative opportunity. But it will be stillborn if students and policy makers have no idea what co-operatives are, how they work and how they can be encouraged.

This ignorance also enables charlatans to fill the space with all sorts of outlandish business models called co-operatives or mutuals when no meaningful control in the enterprise is exorcised by the members in the form of customers, suppliers or workers.

It is for this reason it was great to be in Scotland and to see the excellent work that CETS are doing. They now have three levels of qualification approved by the Scottish Qualifications Authority. Beginning with Co-operative Enterprise the Democratic Alternative, history of the movement, practical activities and an international perspective, this is a huge step in the right direction.

It was also a delight to be at the launch of Democratic Enterprise a fantastic new educational resource. Developed jointly between CETS and the University of Aberdeen it is designed for undergraduate students and provides an open access, introductory-level analysis of democratic models of enterprise, ie co-operatives and employee-owned businesses. A supplement to any course or module that deals with these topics, it also stands alone as a template for academics who wish to incorporate material on democratic models of enterprise into their courses or modules.

This is a completely free resource so any teacher or lecturer can get hold of this material at: www.abdn.ac.uk/cets/resources/democratic-enterprise. So no excuse for university teachers to ignore the topic, Dairmuid McDonnell, who has worked on this for CETS deserves the plaudits but this is just a start of the education and educational tools we need to take co-operatives and co-operation out of their intellectual ghetto.

Friday, 8 June 2012

Celebrating the Co-op Group's Democracy

There is no doubt that the Co-operative Movement like all progressive movements underwent a near death experience during the onslaught of Thatcherism. Today we have a vibrant and exciting sector that to be honest is in a much better shape than we ever thought possible but perhaps not in as good a position as it should be. This was what went through my mind as I sat in the Annual General Meeting of the Co-operative Group in Manchester on a very hot weekend. The Group is the giant of the UK Co-operative sector a collection of significant individual businesses that have grown from a series of amalgamations of smaller consumer retail societies and the shared services the old Co-operative Wholesale Society used to undertake on behalf of the entire consumer co-operative movement. The AGM in Manchester is as you would perhaps expect in society with 7.2 million members a huge example of representative democracy with delegates from all the regions and devolved nations and from affiliated independent societies. Making for hundreds of representatives in a huge co-operative parliament. The Group has a lot to celebrate, with a store in every postal area of the UK we are all familiar with the Co-op food stores but did you know it is Britain’s 3rd largest pharmacy chain, as well as Britain’s biggest farmer and funeral director? Then there is the Banking Group and the travel arm with Thomas Cook. This is a huge business conglomerate when they have to some extent gone out of fashion. With a turnover of £13.3billion and £585million operating profit there is a lot to discus. A large part of the chair, Len Wardle’s, report to the members was taken up with the proposed purchase of banking branches from LloydsTSB. Frankly members have been disgusted with the way this had been reported in the financial press. The attacks on the Co-op Group board members as, a nurse, a Methodist Minister, a civil servant, a farmer, etc and therefore unfit to run a bank drew the response that if more Banks had been managed by people with common sense and real world experiences the country would not be in the mess it is in now! This attack on the democracy of the Group is a fundamental issue. We cannot allow the FSA or our enemies in the City who are against our democratic culture to determine our structure. Better in my opinion to pass over the opportunity for quick growth and stick to slower more organic growth than allow ourselves to be dictated to in this way. There is also a school of thought that in the present crisis in the banking sector it is impossible to do any accurate due diligence on these banking operations. The Group also has some new irons in the fire with the expansion of Co-operative Legal Services widening access to the law with the creation of 3,000 new posts. This is an area where trust is paramount and is a testimony to the integrity of the brand. Members however where not resting on their laurels. Clearly as a community retailer the Groups fortunes rise and fall with the communities they serve. There where key motions on improving the food store proposition and a demand that the Co-op Group supports the Living Wage Campaign. This latter is a tough ask for the Group as competition in the food sector is vicious and a 10p increase in the hourly rate is £50million off the bottom line. Also the competition in the form of Asda-Wallmart, Tesco and others has deep pockets. However the Board where anxious to find ways within the means of the Group to see what could be done and to report back to next half yearly meeting. There were tough questions on, supporting the communities in which we trade, e-business, joining with other European Co-operators in international buying, as well as issues around packaging and waste, and executive remuneration. The board where certainly put through their paces. I think however we are fortunate in the quality of the management team and the excellent quality of the CEO’s of the independent societies on the board. People like Ursula Libetter of Lincolnshire, Martyn Cheadle of Midlands, and Ben Reid of Midcounties stand comparison with any CEO’s in the corporate sector. The AGM had some more pleasant duties like voting through the distributions of £50.8million to the individual members and £24.4million to employees. I must say also I was deeply impressed with the contributions from the delegates from the Group regions, the quality of the arguments put forward, even if you did not agree with them was impressive. The passion for the communities they represent shone through, with rich accents from all parts of the United Kingdom. The democracy and representativeness of the Co-operative Groups Parliament feels and sounds like the real thing unlike some of the noises that emanate from the Palace of Westminster which these days sound like bland waffle in comparison. As I said at the beginning we are in a stronger position than we dared expect but we know we can do better and we will have too if in the present period we are to withstand both the competition and the destructive nature of the government’s economic policies.

In Praise of Champagne Socialism!

I am sure many readers of the Morning Star have been accused of being the proverbial Bollinger Bolshevik because they perhaps have a taste for the very best in food and wine. It is funny how many TV chefs trek half way across Europe to eat the food of peasants. I wonder if it is to escape the processed pap they help the supermarkets to sell to millions of us Brits! The TV advertisers tell us it is traditional or just as good as mother used to make but nothing could be further from the truth. There is no greater pleasure than sharing a meal, of good food and good wine, in good company. The tragedy is that unlike in most other European countries where people are closer to the land because of our early start at industrialisation and the consequent land clearances most Brits have long since lost contact with the place where their food and drink actually comes from. I well remember my first visit to the Fete de Humanite the newspaper of the Communist Party of France. Each region of the Party had a tent with a bar and restaurant selling its own particular regional speciality and the Communist Party’s from other countries had similar stalls. I particularly enjoyed those of Italy, Spain and Portugal. I can still remember the Portuguese stand with its grilled sardines and Douro wine; it makes my mouth water to think of it. One refuge from this blandness and an escape to world of the very best wine at very reasonable prices is to loin the Wine Society. WHICH readers proclaim it to be the very best of wine club voting it head and shoulders above all the others. Last Christmas I bought my wife a share in the Society, she is half Spanish, and is particularly fond of the albarino wines of the Rias Baixas area in North West Spain, which can be hard to come by. I must admit she went a bit mad with her first order delivered in the Society’s own van. “Never mind”, I said, “I will help you to get rid of it”! Unlike other clubs the Society is a genuine co-operative with a rather interesting pedigree. For the last of the Great Exhibitions, in 1874, various countries sent large quantities of wine in cask to be stored in the cellars of the Albert Hall where according to the early history of the society, ‘it entirely escaped notice from visitors’. The Portuguese growers appealed for help, step forward Major-General Henry Scott, one of the architects of the hall who held a series of lunches to publicise the wines. Many guests expressed an interest in buying the wine and Scott proposed the setting up of “a co-operative company” to buy good quality wines and sell on a regular basis to members. The International Exhibition Co-operative Wine Society Limited was born. This months AGM will be the 138th year the Society has reported to its members. It is still owned solely by them (one share each) and trades exclusively with them and there are a clear majority of elected members, 8 out of 13, on the board. The focus however is the same as it has always been and that is to make available to members the best quality of wine and service at the best possible price. The society sells only to members and a lifetime share costs just £40 with no annual fee or obligation to purchase and what’s more new members get a credit of £10 to their account to help with their first purchase. The Society’s wine buyers cover the world looking for excellence in every price bracket. Prices start as low as £5 a bottle. Whilst of course they carry all the classics from Claret to Burgundy and the Rhone the current range of 1,500 wines enables members to explore less well known wines if I am beginning to sound like their marketing manager it is because the more members the lower the costs! As the society measures success in member satisfaction at the beginning of this year they reduced over 300 prices and there where no price increases. Because they are a co-op they where able to reduce margins and reinvest previous year’s profits back into the society. 2011 was a tough year with a VAT increase, volatile exchange rates and members feeling the pinch and trading down. So despite the highest ever case sales, over 600,000 to 110,000 members, the deliberate reduction in margin meant that gross turnover only slightly increased to £69.2million. They have declared a 2% dividend which is to be retained within the business to continue to improve the service which includes free delivery on cases of twelve bottles. The price and quality of wine from the IWC is second to none and according to the chair Sarah Evans, who spoke at this years co-operative retail conference, this is thanks to its mutual, co-operative, status, “the buyers are not tasked with meeting specific selling prices and profit margins set by commercial priorities, but with finding high quality, interesting, value-for-money wines from around the world at all price levels. Member satisfaction is paramount, maximising profit is not.” They must be doing something right. Despite the fact they do not advertise membership grew last year by 13,269! As I write we have just taken delivery of a case of white sauvignons for summer which I can tell you we will enjoy drinking even if it never stops raining!