Signs of a meltdown at the Co-operative group of companies
are multiplying at an alarming rate. Following last week’s mark-down of bank
debt to junk status, the malaise is hitting all of its operations including insurance,
supermarkets and beyond.
The head of the bank, Barry Tootell, has resigned. He was
hired three years ago to lead the purchase of 632 Lloyds branches. That failed.
The Co-operative was found not to be up to scale of the task.
Then came the news that the group was forced to consider selling
its long-established insurance businesses as the bank struggles to meet a
shortage of capital estimated to reach as much as £1.8 billion.
Increased centralisation in its distribution network has led
to supply problems with smaller shops being left with empty shelves for part of
the day. Staff are said to be furious at being forced to accept worsening
conditions, including increased productivity and longer hours.
Customers are complaining that the range of Fair Trade
goods, which have been at the heart of the supermarket’s ethical brand image,
is being reduced, and prices are rising.
The Co-op’s problems are bad news for the Labour Party which
depends on a huge £3.9 million overdraft from the bank, the latest in a long
series of loans on favourable terms. The trade union-backed Unity Trust Bank is
also concerned because it is 27.6% owned by the Co-operative.
So what has gone wrong with a bank that has 6.5 million
customers and claims an ethical approach to investment?
In 2009 the bank merged with the Britannia Building Society,
an apparently good partner for the Co-op, with a shared concern for ethical
trading and environmental issues close to its heart. But appearances can be deceiving.
When Lloyds staff were going over the books in preparation
for the takeover of branches they discovered the awful truth. In merging with
the Britannia, the Co-op had acquired a portfolio of highly aggressive
commercial property lending and buy-to-let mortgages, dangerously exposed to
the downturn. Now the losses are mounting
What can be learned from all of this?
The co-operative movement began in 1844, and now involves a
billion members of 1.4 million co-operative societies across the world – and it
is spreading as the crisis deepens.
But the movement is at a crossroads. Its members can no
longer sustain the idea of a peaceful co-existence with its capitalist
competitor. Many say that the UK Co-op lost its way years ago, attempting to
ape the behaviour of the major supermarkets, whilst offering a caring, sharing
alternative.
New and old co-operatives elsewhere in the world face
similar problems.
On May 9, after along struggle, the 17 remaining workers of
the 280 who famously occupied the US
Republic Windows and Doors factory in 2008, officially opened the New Era
Windows Cooperative after purchasing the production equipment and materials. But
the 17 are working without pay.
Meanwhile In Spain’s sharply contracting economy, workers at
the co-operatively-owned Mondragón Corporation voted unanimously to create a restructuring
and employment fund. This is intended to guarantee the financial
sustainability and employment of Fagor Electrodomesticos, a large domestic and
commercial appliance manufacturer.
Half of the €70 million fund will come those companies in
the group that have profits, draining a permanent fund usually used in order to
set new projects in motion. The remaining 50% will come from all the companies
in the group. They will hand over 1% of their gross salaries for six years.
So even in this most successful of co-operatives,
co-existence within the capitalist model means the worker-members have to vote
to absorb the effects of the global crisis.
These self-defeating acts of defiant compliance pose the
question of replacing the for-profit capitalist model of production lock, stock
and barrel. In a new framework, co-operative working would predominate rather
than remain the junior partner that it is now.
Gerry Gold
Economics editor
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