How coexistence with capitalism undermines co-ops

Two of the world’s biggest and best known co-operatives are struggling with the impact of the unending global recession. Both are seeking rescue deals by a hedge funds and private equity groups that could lead to their destruction.

Yesterday, the UK’s 150-year old Co-operative Group announced a revised plan to rescue its loss-making bank. Meanwhile, Fagor, the consumer electronics arm of Mondragon – the Basque workers’ co-operative established in 1956 – is racing to secure emergency funding to avert a bankruptcy declaration.

The Co-operative Bank’s troubles began with its acquisition of the Britannia Building Society in 2009. Britannia had made big corporate loans which lost value following the 2008 crash, contributing a major part of the bank’s £709m loss.

Fagor has been hit by the sharp fall in consumer spending across Europe and the collapse of Spain’s speculative construction boom. Sales at the division fell from €1.8bn in 2008 to €1.1bn in 2012. It has not reported positive earnings since 2008 and has accumulated debts of €850m owed to banks as well as other parts of the Mondragon group, including its credit union and its own employees.

Is this a story of the failure of the co-operative model? Most certainly not. Co-operation and collective activities have been fundamental to society since modern humans evolved. 

In the US, for example, as John Curl explains, cooperatives, cooperation and communalism were intertwined with history of the country: from native communities where property was unknown to the self-governed co-operatives who challenged and overthrew the corporate monopoly of the British East India

Company. The ending of slavery, and the gaining of rights including women's suffrage, workers’  rights and union rights, as well as civil rights are other examples he rightly cites.

In the short history of the global rise to dominance of private ownership and the wage-labour contract - the social relations of capitalist production - the modern version of the co-operative movement has pursued contradictory aims. It has attempted to make a place for itself, offering an alternative model whilst coexisting and competing within the capitalist framework.

Curl shows above all how participative economic democracy has been in a constant battle with capitalist wealth concentration.

Two comprehensive reviews of the UK’s co-operative movement - in 1956, and in 2000 – were designed to keep it in bounds, ensuring its survival “in the modern marketplace” whilst preventing the liquidation of assets built up by prior generations of co-operators.

Today’s proposed deal between the Co-operative Group and the LT2 group of vulture funds would, it is promised, embed its ethical values into the constitution of the bank. But the deal also involves the group as a whole - which owns supermarkets, farms, pharmacies and funeral homes - pumping £462m into the bank, equivalent to around £60 for each of the group's 7.9 million owner-members.

This would open a main artery through which the private investors would be able to suck the vitality not just of the bank, but from the whole of the group, carrying out the liquidation of assets the 2000 review was supposed to prevent.

Far from being failures of the co-operative model, the problems at Fagor and the Co-operative Bank show that the time for coexistence and competition, for compromise with the now bankrupt capitalist system is over. Rather then meekly offering themselves up as prey to vulture funds, co-operators must now go on the offensive.

Co-operative enterprises can and should play a key role in the People’s Assemblies which are forming throughout the world. A global network of Assemblies can provide the democratic framework needed to replace capitalist destruction with the principles of co-operation. Such a network could acquire the power to end the rule of globalised private finance capital.

Gerry Gold

Economics editor