Time to Look Again at the Co-operative Option

 

A piece I wrote for Chartist 

It is admittedly from a low base but it is a fact that since the great crash of 2008 the co-operative economy in the UK has grown by 19.6% to £35.6 billion, the number of individual co-operative enterprises has grown by 23% and the number of members in co-ops has reached 13.5 million (4.5 million more than all the individual shareholders).

Internationally too the sector is in rude healthy with over a billion people members of co-ops employing over 100 million people more than all the transnational businesses added together and the world’s top 300 co-ops have a US$2trillion turnover.

So why is the sector still so invisible here in the UK?  I believe this is for two reasons, people felt following the demutualisations of the eighties that it was a historical thing (interestingly none of the demutualised building societies have survived as stand alone mortgage banks) and secondly because in the public mind the sector is almost exclusively identified with co-op shops which where disappearing and only now are clawing their way back through mergers and acquisitions.

It may seem odd but in the first half of the nineteenth century as Britain was undergoing the industrial revolution it was unclear which model of business governance would dominate this new economy. People are familiar with Robert Owen who was a huge influence on the early co-operative movement but more important, in developing co-operative theory was Irishman William Thompson (1775-1833).

Thompson coined the word competitive to describe the system we now have. His An Inquiry into the Principles of the Distribution of Wealth Most Conducive to Human Happiness; applied to the Newly Proposed System of Voluntary Equality of Wealth, (1824) was an important contribution to the political-economy of co-operation. Thompson debated with J.S.Mill in the 1820’s as Mill too became convinced that the co-operative was the ideal business form. In his Principles of Political Economy (1852) he wrote,

“The form of association…which if mankind continues to improve, must be expected, in the end to predominate is not that which can exist between a capitalist as chief and work-people without a voice in the management, but the association of the labourers themselves on terms of equality, collectively owning the capital with which they carry on their operations and working under managers elected and removable by themselves.” 

Up to the end of the century it looked a no-brainer that co-operation would win out over wasteful capitalism. In 1899 Alfred Marshall, the founder of the Cambridge school of neoclassical economics, wrote in his essay on Co-operation, that in a co-operative, “the worker does not produce for others but for himself, which unleashes an enormous capacity for diligent, high quality work that capitalism suppresses. There is one ruined product in the history of the world, so much greater than all the others that it can truly be called the ‘wasted product’ – the best working capacities of the labouring classes.”

So how come for a hundred year’s co-operation vanished from economic text-books and as a consequence from our economic life? Pami Kalmi of the Helinski School of Economics has documented this disappearance.

He has shown that before World War I co-operation had a fair shake there was extensive discussion of co-ops, with theoretical insights and a careful examination of existing co-operative forms.   He pins the change on two things a move from an institutional approach ie from actually existing firms and co-ops to the more theoretical idealised neo-classical model, and to the increased role of the state which meant that all the social problems fell to the government with economists offering top-down solutions based on idealised abstract market solutions.

The current problems we face is that markets are an over simplified abstract idea which in the real world only work for short periods as a means of allocating resources. We only have to look at the multiple crises in banking, housing, energy, jobs, health and social care, transport and even in food supply, all due in their own way to market failure of the current capitalist model.

Yet the solutions to these crises offered by both government and opposition are almost invariably more top down, more market, and more competition!  It seems that those bought up and educated in the current period believe that the thing they want, “the market” offering consumer choice and a rational distribution of resources can only achieved in a capitalistic system.  But the market economy arose centuries before capitalism and the idea that capitalism and the market are synonymous is completely unfounded.

It is this inability to even imagine a co-operative alternative amongst economists, policy makers and politicians that is both holding back the development of the co-operative economy but more importantly doing immense damage to our national economy.

After all has any model been taken more in vain in the last couple of years than the “John Lewis Model”? This has become one of those Humpty Dumpty phrases from Lewis Carroll’s Through the Looking Glass, “When I use a word it means just what I choose it to mean.” Talking about “mutuals” without any understanding of them is spreading distrust.

No wonder trade unionists see the “mutualisation” of public services as mere privatisation. Some of this failure to connect is the fault of us in the co-operative sector who seem to relish making co-op structures as complex as possible (although when you look at them in details share holder businesses too can be pretty complex).

In a neo-liberal binary world of public or private the very idea of a private business that is owned and controlled democratically by its members and that enters the market for social ends just does not fit into this world view. No wonder they have been successfully eradicated from economic textbooks.   

The fact that in some circumstances co-operatives can be more efficient, innovative or indeed more profitable than shareholder businesses is impossible for them to imagine.

If we look at the best examples of co-operatives around the world in energy, in social care, in food supply in housing and even in financial services many of the solutions to our current predicament are staring us in the face if we could only see them.

This is why Ed Mayo secretary General of Co-operatives UK has called for a National Co-operation Policy. Put simply to promote co-operation and co-operative solutions within and between enterprises and enterprises and individuals when it adds value. There are good examples of this approach from countries as diverse as Denmark, Germany, Italy and France.

Some of this ignorance about co-operative forms is the fault of the movement itself and this is also why the theme this year for Co-operative Fortnight, the movements’ outward facing celebration of all things co-operative is the “co-operative option.” We have set ourselves the challenge of persuading accountants and lawyers’ business advisers and bank managers anyone who advises start up businesses that there is always the co-operative option.

We have a lot to do but as John Stuart Mill argued “we may through the co-operative principle, see our way to a change in society which would combine the freedom and independence of the individual, with the moral, intellectual and economic advantages of aggregate production.”