The age of profit has reached its limit

In the wake of the worldwide scandal of meat products boosted with horse, investigations into contaminated cakes sold by IKEA are certain to reveal more links in a contaminated global food chain. The actual cause will stay hidden, however.

Chinese inspectors discovered high levels of coliform bacteria in cakes exported by a Swedish supplier, Almondy, to IKEA outlets throughout the world. Close to two tonnes of the product were destroyed and it was withdrawn from sale in 23 countries.

Coliforms can be found in soil, vegetation, water and everyday human environments, as well as in the faeces of humans and other warm-blooded animals, though so far at least, there’s no report suggesting the presence of human intestinal bacteria.

As public safety concerns grow and more inspections are carried out, the physical causes will look different under the microscope as each new case of a polluted product comes to light. But the true cause common to them all can’t be seen through any laboratory equipment.

In the capitalist economy, the over-riding concern is for profit. If the shareholders in a company, now mostly giant investment funds,  see their unearned incomes – their shares in the profits extracted from the production and sale of commodities – falling, they move their capital elsewhere.

So to stay in business every company has to continuously compete to attract investors by driving the rate of profit up, and one of the key ways they do that is by reducing the costs of production.

As we’ve seen, the price of horsemeat is less than a quarter the price of beef – even the cheapest, worst quality beef. So there’s really no contest. The temptation to fraudulently change the composition of a product using less and less costly ingredients is irresistible.

It’s a law governed process that drives the dominant capitalist system of production in all its guises. Control systems involving regulations and inspections attempt to keep a lid on it, but they are always overwhelmed by the inbuilt inevitability of polluted, debased, denatured production and its consequent despoliation of the planetary ecosystem.

There’s another law, a universal. Everything – including every social system – is governed by specific laws that regulate its origin, existence, development, passing away and perhaps, as the science of evolution tells us, its replacement by one more suited to the changing circumstances. 

The profit which defines capitalist society is derived solely from the work people do in creating products. The cost of that labour lies at the heart of the problem. Competition means that the cost of labour must be continuously reduced. 

Reducing the cost of food helps to reduce the cost of labour. So there’s a downward spiral: competition demands cheaper food, cheaper food means lower wages, people on lower wages must have cheaper food.

It’s been a brilliantly successful strategy for a couple of centuries, alternating periods of rapid explosive growth with sudden, brutal and destructive contractions, extending its reach to every part of the globe and overwhelming all opposition.

But there are limits. There always are. That’s another universal law of nature. 

So when the process of competition finds IKEA feeding bacteria that occurs in sewage to its customers worldwide you know that the social system has arrived at a limit of its development.

Fortunately, nature has ensured that the replacement for capitalist society has been developing in opposition to it for some considerable time. It takes the form of democratically-run, not-for-profit organisations like worker-owned cooperatives, credit unions and community banks. These are mushrooming in the United States, of all places, as Marjorie Kelly explains.

The author of the book Owning Our Future: The Emerging Ownership Revolution: is right when she says: “When economic relations are designed in a generative way, they’re no longer about sole and despotic dominion. Economic activity is no longer about squeezing every penny from something we imagine that we own. It’s about being interwoven with the world around us. It’s about a shift from dominion to community.”

It’ll take a co-ordinated push to end the age of profit, but it can be done. It has to. 

Gerry Gold

Economics editor

Cameron's great con trick

Conservative leader David Cameron launched his party’s election manifesto with a head-turning invitation to working people in their communities to take on the power to change the system. But don’t be deceived. This is just part of the Tories’ approach to paying off the towering debt that’s threatening to sink the British state.

If elected, he says his government will devolve power, allowing co-operatives and social enterprises to run schools and health services. “Giving public sector workers ownership of the services they deliver is a powerful way to drive efficiency, so we will support co-operatives and mutualisation as a way of transferring public assets and revenue streams to [the] public sector," says the manifesto.

Using language long familiar to the labour and trade union movement now deeply disenchanted with 13 years of New Labour, and appealing to the recent upsurge of people determined to defend and develop not-for-profit services in and for their communities, Cameron has clearly picked up on some popular sentiments.

The Tory leader has noticed that co-operatives, mutuals and not-for-profit social enterprises can mobilise the support of large numbers of volunteers eager to work for the benefit of their community when the lifeline services provided by post offices, schools, health and care centres, as well as local shops are threatened with closure. He could hardly fail to notice the charity shops that feature prominently in every high street in the land now that the credit-funded property and retail boom has collapsed.

So the Tories have put two and two together. On the one hand are the hedge fund managers, bankers and similar types with which he has filled the ranks of his party depleted by departing expenses fraudsters. They and their backers are determined to ensure that the interest payable on government bonds finds its way out of the economy and into their bonus payments. And they are demanding savage cuts in public sector spending so as to reduce the government debt to manageable levels and avoid state bankruptcy.

On the other hand are the millions of people who feel and sense that the systems and services essential for social cohesion are being knocked away prop by prop.

So, thinks Cameron, why not hand the essential services over to be run by volunteers? The choice to be offered to public sector workers will be redundancy and an end to the public sector as we know it, or they can form themselves into co-operatives and compete for contracts offering the cheapest tender using willing volunteers. Brilliant!

Cameron’s proposals for the public sector don’t extend into the world of private profit, of course. And New Labour’s manifesto talks of returning Northern Rock to the private sector as soon as possible.

But if profit-sharing employee-owned businesses and not-for-profit community enterprises can run things on a not-for-profit basis, and there are plenty of successful examples to prove that they can – the John Lewis Partnership to name just one – why not extend the principle to the whole of society?

Why not run the banks on the same principle as the NHS, as a not-for-profit service to society? It isn’t a new idea – building societies were created for exactly that and it is good of Cameron to raise the idea again. Why after all, do for-profit finance houses need to exist at all, tempting us into deeper and deeper debt?

What’s needed now is to go the whole hog. Let’s set up the democratic structures to take all of the assets of the corporations and banks into social ownership, cancel the debt and run the whole of the economy on not-for-profit lines. It’ll do us and the planet a world of good. In the meantime, hang on to your vote!

Gerry Gold
Economics editor

Co-operatives can help unlock the future

Imagine, if you will, a global society of communities whose citizens wake each day filled with enthusiasm about the prospect of working together, co-operating on the land and in the buildings they own to meet their needs for food, clothing, housing, education, health and transport.

These people don’t have “jobs”. There’s no employer, nor any employment contract. Their work is a contribution willingly given to the satisfaction of the needs of their community. The work they do entitles them to a share of the collective product.

These citizens aren’t living and working to pay off accumulated debt. They aren’t continuously bombarded with enticements to consume more products they never knew they needed. They've broken the addiction to salt, sugar and fat. None of the value they generate during the day is siphoned off for distribution as profits to external shareholders.

They meet regularly to review their needs and plan what they will do to improve their lives and communities. Because they are in control they can ensure that the way they live them is consistent with the continuation of life on the planet for generations. They aren’t driven by an economic system towering over them, demanding growth and bringing catastrophic impacts.

Some 150 years ago, when the industrial revolution brought intolerable conditions for the newly-urbanised workers and their families, 28 artisans, mostly weavers, in Rochdale near the city of Manchester in England formed a society on just these principles. Today it is a vast, worldwide movement encompassing hundreds of millions.

There are over 4,300 co-operatives in the UK alone, with over 11 million members and total assets of £8.5 billion. Together they create and sustain nearly 200,000 jobs and contribute some £27 billion in turnover. The most significant in terms of numbers are the consumer and worker co-operatives, co-operatives consortiums, agricultural co-operatives and housing co-operatives. The Co-operative is now the UK's biggest farmer.

Collectively-owned, democratically-controlled credit unions are one of the financial arms of the 150 year-old co-operative movement. Worldwide there are 186 million members of 54,000 credit unions in 97 countries. Credit unions offer cheap loans to their members who save regularly. Unlike the world of fantasy finance, credit unions lend less than they have on deposit.

The survival and worldwide development of the movement is a remarkable testimony to its strength, resilience and sustainability. The movement is a testimony to its own historical necessity.

But for many who share its principles the old-style co-op seems inadequate to the urgent tasks presented by climate change, resource depletion, economic and financial meltdown, and a clutch of life-threatening pandemics.

So a new movement is spreading rapidly throughout the world, calling itself “transition” and reinventing the very same principles of co-operation that have bound people together throughout human history. Moves are afoot in Wales at least, to bring the two together in a potentially powerful coalition – a co-operative transition which could direct itself to achieving the profound systemic changes now urgently needed.

Meanwhile, in the Welsh Assembly, David Melding, Conservative chair of a new cross-party group, sees a bigger role for co-ops but only within the framework of the status quo. Melding denied that the co-operative movement was unfamiliar ground for Conservatives adding. "It seeks to enhance the forces of capitalism." This will be news to many in the co-operative movement in Wales who see themselves as opponents of capital, dealing with its worst effects.

Amidst the slide to economic slump and state bankruptcy, a moment of political truth is approaching for the co-operative movement in Britain. It needs to break its long association with Labour and form new alliances to enable it realise its full potential by being part of a transition to a society based entirely on co-operation and not competition.

Gerry Gold
Economics editor