An economic force for good

Co-operatives in the UK have struggled to reach the scale seen in other countries. In a changing world, can co-ops become a powerful and creative economic force again, asks Clare Goff

This year is the International Year of Co-operatives and, to celebrate, a new movie is being filmed telling the story of the birth of the Co-operatives in Rochdale, England. The Rochdale Pioneers – its working title – will recount the lives of the 28 founders of the Rochdale Equitable Pioneers Society in 1844, an event recognized as the movement’s birth.

But 168 years on, as the original pioneers get set to hit the big screen, how are co-operatives in the UK faring?

According to Co-operatives UK, there are 5,450 independent co-ops in the UK and almost 13 million co-operative members, which between them drive an annual turnover of £33bn, a mere 2% of GDP.  The vast majority of co-op businesses in the UK are consumer co-operatives, led by retailer and financial services organisation The Co-operative Group and John Lewis. These two are largescale anomalies in the overall co-operative economy; the vast majority in the UK are smaller agricultural, consumer and workers co-operatives with turnovers of less than £500,000.

In many parts of the world however, co-operatives have reached much bigger scale and, crucially, are helping solve entrenched social problems, from the need for affordable housing to the revival of local economies.

The most famous of these is the Mondragon workers’ co-operative in the Basque region of Spain, the biggest business group in the region, employing over 83,000 people across a network of 256 companies.

Co-operatives in Sweden and Norway provide a large chunk of their country’s housing and offer an affordable, intermediate alternative to owner-occupation and private and social rent, while in Italy 7,000 co-operatives provide social care, health and employment services.

In the US a networked model of co-operative businesses is being used in Cleveland Ohio to ensure the local spend of anchor institutions such as hospitals and universities benefits the local economy, while elsewhere in the world co-ops are finding renewed energy in a changing economic landscape.

Support for co-ops in the UK has rarely been higher, with government and opposition both tussling to reclaim the term. But why has the UK fallen behind while the co-operative model has flourished elsewhere?

John Goodman, head of policy and the regions for Co-operatives UK, says that in most countries co-ops specialise in a particular area and that the UK has enjoyed success in the consumer sector.

‘In the UK we have traditionally had a very consumer-focused co-operative sector. That was the path chosen by the Rochdale Pioneers. In other areas we have some catching up to do.’

‘THATCHER CAME ALONG’
Nic Bliss, chairman of the confederation of co-operative housing (CCH), has been pushing the case for co-operative housing in the UK for 20 years but has been unable to shift the low level of uptake; housing co-ops in the Scotland and England account for just 0.6% of stock compared to 18% in Sweden and 15% in Norway.

He says that co-operative models of housing began to flourish in the 1970s and 80s but came to a halt when, according to Bliss, ‘Margaret Thatcher came along’. Her right to buy programme and a push towards owner-occupation opened up house ownership for many but, numerous housing bubbles later, the need for affordable housing has reached crisis point.

Workers’ co-operatives in the UK also began to thrive during the 70s and 80s with the support of the Labour government.  The loss of momentum during this period is blamed on failures among co-ops themselves in Robin Murray’s report Co-operation in the Age of Google. The drive towards a market-driven economy since the 80s also played a part in the decline of co-ops, but, according to Murray, economic conditions are now moving back towards a more favourable outlook.

He identifies a number of social and economic shifts that are paving the way for a resurgence of co-operative ventures including the arrival of distributed networks such as the internet, the beginnings of a new era of informal co-operation and the need for a ‘civil economy’ as both the private shareholder model and the hierarchical state reveal their flaws. His 196 page report makes a number of recommendations and is one of myriad of publications in recent years anticipating a new era of co-ops in the UK and assessing the support needs for them to flourish.

CRITICAL ELEMENTS OF SUCCESS
Bringing Democracy Home is one such report. Commissioned by CCH to look into the conditions that allowed the international co-operative housing sector to take off, it pinpoints three elements, all of which are needed for housing co-operatives to be successful.

These are a sympathetic government, an appropriate support and advice framework and grassroots community development.

Without all three of these elements working in harmony it is difficult to get coops to happen, says Bliss. ‘In all successful housing co-ops these three things coincided,’ he says.

Governmental support for co-op housing is on the rise: the Welsh Assembly has included support for co-operative housing development in its manifesto, while both the coalition government and Labour in England are showing support for co-operative and mutual models of ownership, including housing. Local authorities are slowly coming on board and Rochdale Council, one of the group of Labour-led co-operative councils, is set to transfer its housing stock to a mutual model in March, creating the biggest mutually-led housing organisation in the country.

But huge challenges remain, according to Bliss. In particular, the need for a framework of support to help projects get off the ground, and the means to finance development.

Bliss is in discussion with government about creating appropriate finance models to make it easier for emerging co-operative models of housing and is hoping to find a mechanism for housing co-ops to borrow money on a large scale that can then be lent on to small-scale schemes. He cites the Swiss model, in which the government backs loan guarantees for co-operative housing.

A symbol of cooperation at Mondragon, Spain

BUILDING SUPPORT NETWORKS
A key ingredient in the success of Mondragon and that of co-operative sectors in northern Italy and the US is the strength of their support networks. In Italy local consortia of co-ops assess new proposals for co-operative businesses and act as their guarantor. In Mondragon, the Caja Laboral bank for the first 25 years of its existence, developed, trained and mentored would-be co-ops before passing them over to the financial side of the bank for funding.

In the UK agricultural co-ops are organised in consortia, using their collective resources to bulk buy and to help new co-ops launch, but elsewhere in the co-operative movement support is more sketchy. The support work of the Co-operative Development Bodies has been diluted and they have ‘lived hand to mouth for 20 years’, according to Jo White, executive director of one of them, Co-operative Futures.

Support for emerging coops in the UK comes from within the movement itself. The Co-operative Group launched an enterprise hub in 2009 which pays for four days of intensive training and support for new co-ops, and many co-ops put a certain amount of their profits towards the development of start-ups. But as Jo White says, ‘even if all the resources of the Co-operative Group were brought into play it wouldn’t be close to what we need’.

The proliferation of new models of social enterprise, the lack of promotion of co-op models in mainstream business provision and the fact that co-ops have no legal status in the UK also work as a disincentive for new businesses to launch as co-ops.

Italy’s social care co-ops are described as ‘arguably the most extensive and successful programme of mutualisation anywhere in the world’, in Time to Get Serious, a report on international lessons for developing public service mutuals. Its says that Italy’s success can be found in the simplicity of its systems. An Italian law introduced in 1991 created a specific legal framework for co-ops, which is flexible and clear and which allows co-ops to benefit from tax breaks.

Such clarity provides key lessons for the UK, where co-ops struggle with a muddle of legal forms and models.

‘Here it’s always been a bit of a mess and has developed in a piecemeal way,’ says Giles Simon, communications officer at Co-operatives UK. ‘It’s a big disincentive.’

This could change following David Cameron’s recent announcement of the introduction of a Co-operatives Bill which  aims to consolidate and simplify the 17 pieces of legislation currently in existence.

The UK is learning the lessons of greater integration, more powerful support networks and simpler legislation that have helped co-operatives thrive elsewhere, and is taking steps to build a new generation of co-operative businesses.

A CREATIVE AND EFFECTIVE ECONOMIC MODEL
But possibly the greatest lesson from overseas is the importance of embedding a strong organisational model, with members nurtured in co-operative values. As the profile of co-operative and mutual models rises, many worry that the values of the movement, set out by its original pioneers, are in danger of being diluted. Support from government often conflates co-ops with ‘mutuals’, which have a looser form of ownership.

The power of the co-operative model, according to Murray’s report, is that it works. In the 1880s the largest business in the world was a federation of co-ops, in which each layer was elected from below. The distributed democratic structure was economically efficient and allowed it to grow. In all places where co-ops have grown to scale – be it Mondragon, Italy or Japan – it is the combination of economic democracy and organisational effectiveness that have led to success.

As the two main economic structures of the 20th century – the state and the public shareholder model – reveal their inability to solve entrenched social problems, the time is ripe for co-operatives to show their strength, help build the utopian world of mutualism imagined in William Morris’s News from Nowhere, and, as Murray says, ‘become a creative economic force that is more than a sum of its parts’.

• Read our article on Evergreen Co-operatives: A laboratory for a new economic development