Sunday, November 4, 2012

Co-operative model could be the answer to economic woes


Global development news, comment and analysis | guardian.co.uk
Beyond the ethics, co-operatives have weathered the recession well – and private enterprise would do well to take note
Jiang Xingsan's day job is helping to run a vast agricultural group, the All-China Federation of Supply and Manufacturing Co-operatives, which serves millions of farmers across China, and has increased its payroll by 200,000 in the past year alone. But he was in Manchester last week, paying tribute to the Rochdale Pioneers.
"I'm especially proud to come to Manchester, because this city was the birthplace for co-operatives," he says. When the so-called Rochdale Equitable Pioneers Society set up shop in 1844, promising good quality food at fair prices, and a share of the profits for their customers, they couldn't have known that their big idea would spread around the world.
More than 7,000 people, from 90 countries, gathered at the vast Manchester Central venue for "Co-operatives 2012" – part trade-show, part conference, part jamboree and the culmination of a UN-backed "Year of Co-operatives".
Namibian weavers, Canadian bankers and Malaysian tour guides gathered with just one thing in common – their business model. Instead of being owned by shareholders, who extract a slice of the profits, all these co-operatives hand over any gains they make to their customers and staff.
Before the credit crunch, co-ops were easily dismissed as worthy but irrelevant. But the crisis, and the failure of many developed economies to generate a sustainable recovery, have raised public interest in alternative ways of doing business. In total, co-operatives worldwide now have a billion members.
"There's more of a spring in our step now," says Ed Mayo, general secretary of trade body Co-operatives UK. "We have emerged from the crisis still holding trust." Dame Pauline Green, who leads the International Co-operative Alliance, told the delegates last week: "We know that co-operative banks, and credit unions, have not collapsed; they are not in receipt of taxpayer bailouts. Our arguments have begun to find traction with global decision-makers on the back of the sustainability and resilience of our financial model over the past five years."
Mayo has been appointed by David Cameron as a mutuals ambassador, to spread the word: and he says the argument is a much broader one than whether co-operatives are more ethical than their rapacious corporate rivals.
"There's a big story here: not just about responding to the credit crunch, but how the UK economy could be more productive and inclusive if it moves significantly towards a co-operative model," he says.




Much of the movement's energy in the past year has been directed at persuading the government to commit to bringing together all the legislation affecting co-operatives in one so-called Consolidation Act, as previous governments did for charities and company law.
Cameron has promised a Co-operatives Act by 2015, and the Law Commission has been given the job of doing the technical groundwork. "Our vision is it should be as easy and natural to set up a co-operative as it is to set up a shareholder-owned business," says Mayo.
Peter Kimotho, who works on promoting co-operatives for the Kenyan government, also extols the wider benefits – beyond ethics – of a co-operative.
"We have a co-operative development policy in Kenya," he says, explaining that a network of co-operatives offers credit to farmers, and helps them to bring their products to market. "That way, even small-scale producers are able to benefit from economies of scale." In total, Kenyan co-operatives have 10 million members – one in four of the population.
"The co-operative model is better because it empowers the small-scale producer; and in terms of decision-making, it's the policy of one man, one vote."
Some of the co-operatives represented are on a mind-boggling scale: the giant Indian Farmers Fertiliser Cooperative sells to 55 million farmers, who belong to 40,000 co-operatives. Its boss, GN Saxena, says they trust IFFCO not to hoodwink its clients. "We do not play with the market. When there's a shortage of fertiliser, we make it available at the right price. We don't play with the quality or quantity." More importantly, though, every co-op member has been paid a dividend, every year since 1975.
In the UK, Peter Marks, chief executive of the Co-operative Group, which co-sponsored last week's conference, and is trebling the size of its banking arm by buying more than 600 branches from Lloyds, as well as expanding rapidly into legal services, says the co-operative movement is enjoying a renaissance.
"I have been with the company for 45 years, and for most of that time the Co-op was in steady decline. When I joined, we had 25% of the food market; a few years ago it was just 4%." When the idea of Co-op buying the Lloyds branches was first mooted, its governance was criticised, with commentators pointing out that it has, for example, a Methodist minister on its board, which is chosen by ordinary members. But Marks is unashamed of its democratic structure. "My board is full of ordinary people – they're risk averse. Perhaps if Barclays and RBS had Methodist ministers on their board, they wouldn't be where they are now."

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