Economic justice: The cooperative alternative

Roger Sawtell believes that it is time for radical change

The Old Laundry, Bedford Road, Northampton, which houses the Daily Bread Co-operative. | Photo: Photo: Sian Harrison via Wikimedia Commons CC.

Almost three thousand years ago the prophet Isaiah thundered against the arrogance of the leaders and the unjust disparities between rich and poor. If he were around today he would probably be using very similar words.  At the beginning of this century, undeterred by criticism from a few perceptive economists and philosophers, banks were making ridiculously risky loans: businesses were able, freely, to pursue the maximising of profits for shareholders, most of whom had never darkened the doors of the establishments from which they drew an income. By means of huge bonuses, share options and complex financial manoeuvres, bankers and business leaders became richer every year. A somewhat contradictory report in The Sun in 2005 claimed that ‘millionaires are now two-a-penny’. Then came the crash in 2008.

The injustices have become more and more apparent. Today, as the recession begins to bite, the poor of Europe get progressively poorer, in Ireland and Greece and now in the UK, while the rich are relatively unscathed.

Victorian roots

Foreshadowing contemporary Quakers, Isaiah 2:5 says, ‘Let us walk in the light’. ‘Surely,’ you ask, ‘there must be an alternative to the current economic model, which appears to be run by a cabinet of millionaires for the benefit of other millionaires?’ Well, yes, there is. The cooperative movement has its roots in the nineteenth century in economic circumstances that were, in some ways, similar to today.

The burgeoning Victorian entrepreneurs of the industrial revolution were building substantial enterprises in cotton, steel and other manufacturing industries, and employing large numbers in bad working conditions. The wealthy mill owners described their manual workers as ‘hands’, which gave an unintended message that they regarded them as merely one ‘input’ into the production process, alongside raw materials and power.

A different legal structure

A conventional company is owned by its equity shareholders. They supply the working capital. Votes are proportional to the number of shares held, so a small number of large shareholders can control the company and sell it when they choose, without reference to customers or employees.

A cooperative has an entirely different legal structure. It is owned by those most closely associated with the business, usually the customers or the employees, and not the suppliers of working capital. A vital cooperative principle is that each member has only one vote, similar to parliamentary democracy.

The 2007 failure of Northern Rock, a former building society that had become an unregulated bank, and Lehman Brothers, the prestigious New York bankers, in 2008, caused many to question the conventional corporate structure. So, now, enter again the cooperative movement, not motivated by profit maximisation, but based on seven guiding principles over and above the unchanged fundamental requirement to make a surplus rather than a loss.

Cooperatives have social objectives and some are leaders in sustainability, fair trade and a concern for quality of life at work. Not surprisingly, these attributes are attracting attention.

Rising numbers

Some cooperatives are large, such as The Co-operative Group, the high street retailer, with 5.8 million customers/members, and it is growing strongly. Most are quite small and generate little publicity, but the trend is significant. The number of employee-owned cooperatives doubled between 2009 and 2010. As the United Kingdom becomes a service economy rather than a manufacturing one, the cooperative structure is increasingly seen to be appropriate for working groups such as designers, home care providers, architects, doctors, and village shops, as well as housing and credit unions

George Cadbury

George Cadbury, in the late nineteenth century, would have known about the cooperative movement when he moved his factory to Bournville and, although not part of it himself, he was similarly concerned not just with the ‘hands’ of his chocolate workers but with the whole of their lives, body, mind and spirit. He was miles away from being a greedy Victorian factory owner.

George Cadbury is currently regarded by some as a ‘paternalist’, a word that now has a derogatory ring about it, but he was, essentially, a ‘father-figure’ in the best sense of the term, concerned for the material and spiritual welfare of the whole Bournville family. The struggle for better working conditions is now largely won and, if George Cadbury was starting his chocolate business today, he would surely adopt a cooperative structure.

Scott Bader

In the twentieth century there were occasional Quaker exceptions to the worship of mammon. Ernest Bader, a talented entrepreneur, could easily have become a millionaire and sat in the sunshine, but he transformed his family chemical business into a financially successful medium-sized employee-owned enterprise by means of a complex legal constitution. This reflected his concern for democracy and for peace rather than war.

However, his various additional predilections, such as vegetarianism, and some other ‘isms’, caused him to be rather an isolated figure in the Society of Friends and even in his own back yard.

In its early years, Scott Bader confined salary ratios to 7:1 and set a workforce limit of 350 people in order to retain the founding ethos. Both these limitations were later relaxed and, although the company prospers to this day and is highly regarded in trade circles, few other entrepreneurs have made similar transformations.

The Daily Bread Co-operative

The Daily Bread Co-operative in Northampton is a wholefood business with an enviable reputation throughout the Midlands for healthy food and fair trading. It was initiated by a group of Christians, including a Quaker, in 1980 and now employs twenty people and has a turnover of £1.5 million. Social objects include supporting the Fairtrade movement and employing people with mental disorders.

The business makes a modest surplus. It has no debts or outstanding loans and a ‘flat pyramid’ wage structure, including allowances for dependent relatives and special needs. The members do not choose to grow the business much larger but, adhering to the principle that cooperatives help each other, they encourage similar businesses in other areas by staff exchange, joint bulk buying and loans for working capital.

Commercial power

Quakers are well qualified to speak truth to commercial power in our present economic situation and to challenge the principles, and powers, that have caused the present injustice and the widening disparity between rich and poor.

Now is the time for cooperatives to become a more significant sector of the economy. 2012 is the United Nations International Year of Cooperatives. Perhaps the twenty-first century will become the century of cooperatives.

For further information: www.uk.coop

You need to login to read subscriber-only content and/or comment on articles.