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Social reasons for doing business

Jenni Boswell-Jones explores how co-operatives fare during global depression

Business survival is a daily concern for most firms and not just at times of global recession. Most businesses look for work on a daily basis, there is no longer such a thing as a 'customer for life', with a 'job for life'.

Do co-operatives survive? raises the further question: 'which is the more robust form of business structure that can survive a global economic crisis?'

Given that the current global economic crisis is driven by a 'capitalist' model of business as practiced by the high priests of capitalism (banks and insurance companies) co-operatives are experiencing a peculiar, almost 'out of body' situation. Co-ops are not immune to the 'butterfly effect' but their reactions differ from other business practice.

Last August, Co-ops UK carried out a snap survey of 'health check' questions emailed to co-operative businesses. The purpose of the survey was to establish a basic picture of how worker co-ops were being affected by the current economic downturn.

The survey showed that: '.Just under half of the 'respondents' were feeling the pinch, much the same as businesses as a whole. But the interesting difference was their (co-op businesses) responses - no worker co-ops were looking to make redundancies at that time. Those that had to make difficult decisions opted for pay freezes and/or pay cuts.. (in one case up to 30%). As the majority of workers are company members the decisions on pay are usually made collectively. This gives worker co-operatives the ability to make difficult decisions quickly and with employee buy-in. The priority of the business is on keeping all of its employees employed and not about the enrichment of a select few. This increases the chance that businesses survive and are able to quickly bounce back once the economic situation has improved.' (John Atherton: Worker Co-operative Development Officer - Co-operatives UK)

In our 'multiple choice' world there are many different varieties of co-operative business structure each with their own mechanisms for survival: worker co-ops, housing co-ops, secondary co-ops, Industrial Provident Societies, co-operative consortiums, retail co-ops, consumer co-ops - with blue rules, pink rules and white rules. Whatever the 'colour' the business of co-ops is to survive - co-ops are formed on the notion of collective interest and it's in our collective interest to survive.

Most 'worker co-ops' are registered as Companies Limited by Guarantee, an alternative type of incorporation used primarily for non-profit organisations that require legal personality, and commonly used where companies are formed for non-commercial purposes.

Such incorporation locates co-operative businesses within the family of charities and social enterprises. Not a bad place to be these days - if ever in need of a blanket and bowl of 'carrot and dill' soup. But this does not express the fact that worker co-ops are wealth creating businesses owned by a collective of professional workers.

Co-operatives range in size and operation, however, the majority of them are small 'local' enterprises with small turnovers. The principle of the equitable sharing of wealth ensures that the 'big boys' in the co-op family support smaller family members and so on down the line. Through the 'divvy', loans and grants, or through financing 'business support organisations,' 'policy groups', 'banking', 'education and training', a range of services assist economic survival.

Even so not all co-ops survive. If there is lack of demand for a product or an inability to compete within the market then co-ops collapse.

Survival is the very nature of co-operatives. Co-ops were originally formed, in the UK, (Rochdale) by artisans organised as a means of collective survival in the face of wars, trade expansionism, and the economic shift that occurred around the Industrial Revolution which continued the exploitation of a landless peasantry forced into an industrialised working class.

The radical shift of mindset whereby 'ordinary people' assume the status of business ownership can only happen between massive social and political changes. From the serf-like subservience of agricultural workers preceding the 19th Century escape into the armies of labourers or soldiers, the employed working class had tasted moments of status and self determination. This growing 'united we stand.divided we fall' awareness since the late 18th century is reflected in the emergence of co-operatives as a way of doing business.

A co-operative is a company of 'workers' who express commitment to the company (through a £1 share) and have collective interest in the well being of each other, thus providing a stable base upon which enterprise can take root and flourish. An adherence to a number of principles ensures not only against exploitation but where the wealth created through production and trading is shared equitably according to a collective decision-making process.

There are seven guiding principles internationally adhered to in the various co-operative systems.

These are reinforced by a number of fundamental values: self-help, self-responsibility, democracy, equality, equity, solidarity. This sounds nauseatingly 'evangelical'. But these values are unapologetically rooted in socialism and pragmatism. Survival is in everybody's interest.

But economic and social change requires adjustment. For example, a current dilemma for co-operatives is they may find themselves sitting uncomfortably in the ideological shifts that create 'democratisation of public services' and 'property owning democracies' as preached by the Blair/Brown governance or the 'get rich quick', 'looking after number one', 'no such thing as society' Thatcherism.

An example of this dilemma is the emergence of Housing Co-operatives fulfilling the role as 'registered social landlords'. In selling such a managerial service co-ops are perceived as collaborators in the erosion of public / state provision of Council Housing in the interest of expanding their own business, which serves the exclusive interest of the co-op. Other managerial services that co-operatives now provide, such as the running of Parks, Nurseries and Leisure Facilities, sit uncomfortably in the political drive for democratically elected (and therefore publicly accountable) bodies such as governments and local authorities.

Co-ops - although again part of the same family - often sit uncomfortably with trade unions. Worker buyouts and co-operative businesses impact on TU membership insofar as the workers, having metamorphosed into quasi 'business owners/share holders' do not feel the need to be represented. However, most members of a co-op are card carrying trade unionists, because the collective sense of protecting each others right to work is the thread that binds it all together and goes beyond the confines of each individual work place.

Despite all the support mechanisms and good intentions co-operation is not an easy thing to achieve. Many co-ops believe there is a limit to the number of people who can work together equitably. Questions of rates of pay, status, position, levels of responsibility and so on become key issues.

In the mid-1980s there was a rule change (in the UK) whereby the requirement for seven people to set up a co-op was reduced to three people. This small but significant change reflected both a societal shift in our ability to 'collaborate' in numbers greater than one - and was as much part of the Co-operative Movement's own survival tactics to increase its numbers as it was interference from a Thatcherite business ethos.

Although this new realism assisted in increasing the number of co-ops being established (not a bad thing in itself) it also fostered a move towards 'binary' business structures and the emergence of a 'Social Enterprise' hybrid. It is important to remember that this 'shift' occurred at a time when there was social and political upheaval: unemployment was wavering around the five million mark, and there was a 'technological revolution' on our desktops impacting on production methods. Industries heavily reliant on manpower were becoming history, micro companies and virtual companies could equal the 'economic' output of large factories, global deals could be done in a click. The speed at which business was occurring required light fingers, quick feet and single mindedness. How did co-operatives, with all their consultative meetings, survive that hostile environment?

Twenty years later there are 4,735 UK Co-operative Businesses which provide in excess of '.237,000 jobs, £27.4billion in turnover and £9.2billion in assets to the UK economy. Amidst the top 100 UK co-operatives are listed massive consortia and banks with annual turnovers of £billions (e.g. Co-operative Group Ltd - £8,081,900 000) and a number of Leisure Groups with turnovers in the £millions, 'jointly owned' by 10.8million people.' (Co-operative Review)

Collapse, is not always the fault of each player and the 'house of cards effect' touches everyone, in different ways. Co-operatives do not function in a protective bubble, but their collapse may be less dramatic than for example Dot.Com companies. Regular meetings of worker members ensures everyone is aware of what is happening within the organisation and have a say in what and where adjustments should be. If the decision is taken to wind up a co-operative the balance of its assets is transferred to another common ownership enterprise that has similar objectives or to the Industrial Common Ownership Movement. Company assets are not distributed amongst company members. This is in sharp contrast to 'standard' business procedure and helps militate against the rise of 'Phoenix Companies'. It also puts co-op assets into the collective family pot.

In the midst of the ongoing collapse of the world financial markets it was interesting to see full page ads on the back of national newspapers for the Co-operative Bank: 'Security for your money, rooted in our principles, the Co-operative Bank - good with money'

This brings us back to where we started: our heritage, a history of stubborn strength and a social reason for doing business that goes beyond the narrow interests of enriching a select few.