Co-operative movement at the crossroads

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

Occupations confront the state as crisis deepens

Hopes of a recovery in the health of the banking sector and the real economy look more like pipe dreams in the wake of worse than expected figures from Lloyds and Northern Rock. Both sets of losses reveal the impact of the deepening recession.

Financial institutions worldwide are now suffering the second wave of destruction of value since the crisis erupted in 2007. The first wave was triggered by the end of the credit-induced boom as consumers reached the limits of their ability to pay the interest on their mortgage debt. The most exposed to the pyramid of fantasy finance built upon sub-prime loans were the first to be hit and the result was the closure of the credit markets.

The vast sums poured into the financial sector by central banks and governments last year in an attempt at a globally co-ordinated programme to restart lending came to nothing. Rather than disappearing into a black hole as some said, the money has found its way into the gambling houses of the world’s soaring stock markets and is once again driving commodity prices up. These are the figures that are used to bolster belief in a recovery.

Lloyds’ losses of £4 billion are worse then the most pessimistic of expectations, partly as a result of its exposure to the sharp and continuing deterioration in the commercial property market. New Labour’s fabled asset protection insurance scheme designed to help banks by nationalising their losses and passing the cost to taxpayers has also come to nothing, as neither RBS nor Lloyds have fulfilled their promises to sign up.

As businesses fail, jobs are lost and unemployment soars no-one should be surprised that Northern Rock is suffering a greater exposure to mortgage payment default than the rest of the industry.

As the crisis deepens, corporate employers and the capitalist state that stands behind them must attempt to rescue their economic system and pursue a return to profitability by intensifying the elimination of excess capacity in the real economy. They will stop at nothing to achieve this aim.

Yesterday, Vestas, the Danish wind-turbine company won a court order for the bailiffs to end the workers’ occupation aimed at preventing closure of their factory on the Isle of Wight in the UK. Earlier in the day, in South Korea, police commandos descended from helicopters onto the roofs of the Ssangyong car assembly plant in Pyeongtaek, about 80 km south of the capital Seoul, to try and break the occupation by workers trying to protect their jobs. The police commandos stopped short of trying to storm the paint shop after fierce resistance from the workers inside, who were armed with metal pipes, firebombs and projectiles launched by catapults.

As the crisis deepens and workers are forced to fight for their livelihoods they will increasingly find themselves confronted by the capitalist state and its forces. In Britain, this takes the form of the courts, the police and bailiffs and the government. All are dedicated to upholding the legal right to private property – the basis of capitalist exploitation.

Now we must move beyond protest, turning our attention to composting the capitalist economic system and the state which defends it. In the end, “their” property has to become ours if we are to tackle the economic crisis in the interests of ordinary people and not the rich and powerful.

Gerry Gold
Economics editor

New Labour flounders as old order crumbles

When the prince of darkness – aka Lord Mandelson – tells his fellow New Labour ministers not to panic, you can be sure that is exactly what they are doing. The reason is simple. Social anger is mounting as the economic crisis worsens almost by the hour and the government appears to have no sense of purpose or grip on the crisis.

Political intrigue is more frenzied than ever as ministers compete with one another for future dubious spoils, such as the leadership of New Labour. Some brief that Brown is shortly off to head a new global body designed to regulate international finance (!), while others are undoubtedly stoking the fires under David Miliband, the foreign secretary, for his department’s role in the torture of a British resident in Guantanamo. Miliband famously fluffed a challenge to Brown last year.

But Mandelson’s plea for the government to “handle expectations”, “keep a steady nerve and cool judgment” and not be “pushed into hurried judgments because we fear accusations of indecision" will make little or no difference. The pace of events is phenomenal, as is their dynamic, with the old economic order crumbling before our very eyes.

Not long ago, Lloyds Bank was regarded as a boring, safe bank. Forced by the government last autumn into a shotgun marriage with HBOS, today its shares are worth just 50p each. The debts of HBOS are equivalent to the entire capital of Lloyds. And there is worse to come. During the property boom, HBOS lent massively to commercial property developers, hotel chains and leisure companies. Most of these loans are secured against assets now worth far less while as the economy worsens, many of the borrowers are going bust. It seems Lloyds will be back for further state aid. Yesterday prime minister Brown defended the merger as the right thing to do at the time.

Meanwhile, as New Labour makes the saving of the capitalist financial system its sole priority, jobs are disappearing in the real world as recession turns to slump. Yesterday’s instant sackings by BMW in Oxford led to an angry response by the 850 agency workers laid off in the most brutal fashion. Not all of it was directed at the company either. One report says sacked workers threw eggs and fruit at union representatives, accusing them of betrayal. It appears they were in secret talks with BMW about redundancies.

One agency worker, Silvia Fernandes, said: “I've never been sick, I've never missed work and they tell me one hour before (the end of my shift) that I have been sacked. That's not on. That's why people are angry and so upset with BMW and with the union.” Others vented their frustration on new cars at the plant, scratching bonnets with keys, smashing dashboards and hiding ignition keys.

Agency workers, of course, have fewer rights than permanent staff and their vulnerable position owes much to a rotten deal with the government after a half-hearted campaign by the union leaders which left them out in the cold. The angry scenes at Cowley follow on from the explosive strikes by oil refinery workers earlier this month and augur social turmoil on a mass scale.

In the United States, Washington's new director of national intelligence, retired Admiral Dennis Blair, has warned that "the primary near-term security concern of the United States is the global economic crisis and its geopolitical implications”. It could trigger, he said, a return to the "violent extremism" of the 1920s and 1930s. While the New Labour government flounders, you can be sure that at the heart of the British state, similar views are being expressed and that scenario planning is well advanced. It would be a mistake to think otherwise as attention turns away from terrorism to dealing with wider, social unrest.

Paul Feldman
AWTW communications editor