The Cooperative movement has been a tremendous force for good. These scandals should not diminish that

In a time of unfettered capitalism when the welfare state is deteriorating, we need the values of cooperation and compassion that the Cooperative movement embodies.

Barry Sheerman is the Labour and Co-operative Party MP for Huddersfield. He tweets at @barrysheerman

These are tough times for the co-operative movement. The bad debts of the Co-op Bank combined with the bad behaviour of its former chairman are deeply embarrassing and a heavy blow.

Leaving aside the more salacious aspects, which of course the Tories and the right-wing press have seized upon (no doubt they think their banker friends are paragons of sober virtue), at the heart of the Co-op Bank’s problems was the decision, advised by JP Morgan, to absorb the Brittania Building Society with its huge portfolio of bad loans and debt.

This was then exacerbated by poor leadership within the bank and the inefficacy of the traditional accountability systems.

But bad management and financial decision-making are hardly unique to the Co-op Bank. Back in 2008 far larger banks went bust and the government stepped in to rescue them. At the moment it looks like this great ethical bank will fall into the hands of a couple of US hedge funds. It would cost us a tiny fraction of what we spent bailing out RBS and HBOS to save the Co-op Bank. If an appropriate accountability system is put in place, this would be money well spent.

Just as importantly, we should not let these scandals diminish what a tremendous force for good the Cooperative movement has been over the course of its venerable history.

During the industrial revolution workers in the emerging mill towns, mining communities and other industrial centres created a range of institutions to protect themselves from the vicissitudes of a new, harsh industrial environment. Cooperative shops were created by their members providing good quality food and other provisions at reasonable prices. Local consumer control and the annual dividend normally paid just before Christmas, were the hallmarks of the cooperatives.

These same communities created mutual building societies to build homes for workers as well as host burial clubs. Holiday funds and a range of new social organisations sprung up to make life in industrial Britain at least tolerable.

The men and women who created the cooperatives founded them on a strong set of ethical values which were embedded by the Rochdale Principles of open membership, democratic control, payment of dividend and promotion of education. Based on strong egalitarian values, the economic and social revolution that followed might give glitzy revolutionaries like Russell Brand something to think about.

The early cooperatives proliferated – they developed federations and common purchasing organisations such as the Cooperative Wholesale Society, and by the 1930s were the biggest food retailers in Britain. Time has moved on and now there is much greater competition, but cooperatives are still needed today.

We need credit unions to take on Wonga and the other exorbitant payday lenders; we need cooperative grocery stores which source their food ethically to take on the big supermarkets; and we need a mortgage provider offering mortgages at reasonable rates. Most of all, in a time of unfettered capitalism when the welfare state is deteriorating, we need the values of cooperation and compassion that the Cooperative movement embodies.

But the Co-op Group does need to reform to remain relevant in the 21st Century. As I said, the model of accountability has clearly failed. The Co-op rightly prides itself on being transparent and democratic; the problem is that its consumers do not have the same stake in cooperative institutions as they did in the past.

At the time the movement began – in those mill towns and mining communities – when a local store went bust or a building society was badly managed, local people really suffered the consequences. This ensured accountability. Nowadays the organisation is larger and more diffuse and consumers can go elsewhere to buy goods or get mortgages, so they have less of a stake in how it is run.

To rectify this, I believe the Co-op should introduce employee ownership along the lines of the John Lewis model. Cooperative employees would have a real stake in the organisation because if it was badly run, they would not get paid. It would make the system much more accountable, preventing the likes of Paul Flowers from getting to the top.

We must also rebuild and retool our organisation and its businesses to take into account the increasing importance of exciting new areas such as social impact investing and the huge array of new social enterprises. Much is happening in this space and the Co-op must ensure it is involved, infusing these developments with its radical ethical spirit.

With its proud history and timeless values it still has much to offer.

4 Responses to “The Cooperative movement has been a tremendous force for good. These scandals should not diminish that”

  1. swatnan

    Well said Barry! There’s also a lesson here for local Labour councillors, and the ALG, as well.
    In fact The Coop Group is pretty limited as a cooperative in that it is only a ‘Consumer Cooperative’, and not all its staff are members, as well as most of its customers are not members either. Odd. But thats because not many people know all that much about cooperatives.

  2. Mat

    Although most staff are already members, because the staff dividend (ie bonus) scheme encourages it. And there are some that stand for election, but not enough. Not sure why a staff-run co-op would defend the interests of members any better than a consumer-run one though, or what would encourage the participation that doesn’t currently exist. Otherwise a great article.

  3. treborc

    It is a sad state of affairs, and although I use the bank and I use the shop and I happen to still have a Coop political party card, not to sure how long anyone of them will be renewed.

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