How do you justify co-operatives? Or, two concepts of co-operation

When someone asks you why co-operatives are a good thing what do you say? Do you talk about social change and economic alternatives? Or do you talk about productivity and engagement? And, when you do, what are you really saying about the idea of co-operation?

I’ve always been slightly obsessed with the justification for co-operatives. So, finally, I’ve decided to take a detailed look at the philosophical ideas that underpin arguments for co-operatives. This extended blog or essay aims to highlight something that I think is interesting, but I’ll explain it in a few bullets for those who are short on time:

  • Explanations of why co-operation is a good thing tend to fall on one of two justifications: either co-operation gives people dignity, autonomy and control over their lives, or it is a way for people to maximise their individual interests, or a mix of the two.
  • Those which put the emphasis on the former social justification are making a strategic decision to position co-ops as an economic alternative. This makes it harder to sell to business leaders, conventional policy makers and business journalists, but elevates co-operatives above being a business model and makes it a movement for economic change.
  • Those which put the emphasis on the latter economic justification are making a strategic decision to position co-operation as an efficient way to maximise individual interests, like productivity gains or costs savings, within the existing market economy. This makes it more acceptable and more likely to go ‘mainstream’ in the current economy, but is at risk of being superseded by other more effective methods for achieving productivity, cost savings and other interests.
  • I conclude with a call to action for those advocating the co-operative model: to think about the long-term implications of your how you choose to justify co-operation.

The extended blog or essay is below. It’s a work in process and I’d welcome comments from people who feel so inclined.

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The social concept of co-operation

When we look at the different ways that co-operatives are explained and justified we can, I think, see two concepts or ideas of co-operation at work. This dichotomy is particularly strong in the UK, where I am based and which I know best, but I think applies more widely.

One justification, generally found amongst the more radical wing of the co-op movement in the UK today, but perhaps used more frequently internationally, is based around the idea that co-operation is an end in itself, intimately bound up with others values like dignity, autonomy, control, freedom and equality. Co-operation is something we should do because it is part of what moral philosophers from Aristotle onwards have called the ‘good life’.

The UK’s Radical Routes, which describes itself as a network of radical housing co-ops, worker co-ops and social centres committed to positive social change, express the idea in their slogan:

Homes without landlords

Work without bosses

Society without exploitation

This social conception of co-operation – in which working together is about people being able to take control of their lives – is characterised well by GDH Cole in his analysis of the Rochdale Pioneers in The Century of Co-operation:

” . . . if, in 1844 or some time afterwards, a well-informed Englishman or Sctotsman had been asked to say what he understood by the word ‘Co-operation’ he would most probably have answered in terms which would have described a movement very different in its fundamental ideas and objectives from the Consumers’ Co-operation of to-day. . . . to any of the founders of the Rochdale Society, the answer would certainly not have been mainly in terms of the benefits of mutual store-keeping.

“For Howarth and his fellow pioneers store-keeping was but a means – one among a number of means – of forwarding the Co-operative ideal; and that ideal was the foundation of Co-operative Communities, or ‘Villages of Co-operation,’ in which the members could live together on their own land, work together in their own factories and workshops, and escape from the ills of competitive industrialism in a world – a ‘New Moral World’ – of mutual help and social equality and brotherhood.”

Co-operation here is not about business or individual interests, it is not a means to an end; it is a political and social ideal, a way for people to live dignified lives over which they are in control.

Despite a gap of 150 years, despite a very different environment, despite arguably big differences between the types of organisations involved, Radical Routes’ aims and principles appear as a modern version of this:

“We want to see a world based on equality and co-operation, where people give according to their ability and receive according to their needs, where work is fulfilling and useful and creativity is encouraged, where decision making is open to everyone with no hierarchies, where the environment is valued and respected in its own right rather than exploited.

“We want to take control over all aspects of our lives. However, as we are not all in a position of control we are forced to compromise in order to exist.

“We are working towards taking control over our housing, education and work through setting up housing and worker co-ops, and co-operating as a network.”

Michael Albert, a US activist, theorist and advocate of worker co-ops argues along these lines (in an uncharacteristically mild way): “What characterizes positive direction?” he asks.

“Positive direction is more and more people having a more and more appropriate level of say over their own lives. It is more and more people getting a fairer and fairer share of a social product and getting a fairer set of burdens they have to fulfill to be a part of society.”

The economic concept of co-operation

This social concept of co-operation might be used to explain and justify co-operation at the more radical edges of the co-op movement. But there is a second concept of co-operation that we find more regularly used to justify co-operation: the idea that co-operation is a rational way for people – or businesses – to realise, or maximise, their interests.

This is what is being appealed to when claims like the following are made – the kinds of claims which I have on many occasions made when promoting co-operatives:

  • “By working together businesses can reduce costs, share risks and create new platforms for growth. Consortium co-operatives run on a shared and equal way by, and for the benefit of, their members. Members can be businesses, partnerships or individuals.” This is  Co-operative Development Scotland but it could be from many other organisations.
  • “In the UK and elsewhere it has been shown that employees who have a stake in the company they work for are more committed to delivering quality and are more flexible in the face of the needs of the business.” This argument for employee ownership is from the Cass Business School’s research but a host of organisations, like the Employee Ownership Association and John Lewis, make this point.
  • “Plurality of forms of ownership provides more opportunity to align the form of ownership with the appropriate business model, promotes more resilience to shocks within particular sectors and wider economy, allows investors and savers more avenues in which to save and invest and gives consumers more choice.” This argument that the economy can benefit from more co-operatives because it creates corporate diversity and therefore helps protect the economy as a whole is from the Ownership Commission, chaired by Will Hutton.”
  • “Once outside the public sector, employees report greater professional freedom and flexibility to provide user focused services that are responsive to local needs.” This argument, here from the Cabinet Office’s Mutuals Information Service is a classic argument for how co-operative and mutual models are effective ways to strengthen public services because they unleash the interests and creativity of those most closely involved in the service – the users and staff.

Underlying all these arguments for co-operatives is the idea that co-operation is a strategy for self-interested individuals – or firms – to get the best for themselves: co-operation will encourage people to do more, try harder, reduce costs or protect economic stability

Amongst academics this concept of co-operation is of growing interest. Game theory, rational choice theory and evolutionary biology, from foundational texts like Robert Axelrod’s Evolution of Co-operation in 1984 to Martin Nowak’s Supercooperators in 2011, all highlight the importance of co-operation amongst self-interest agents.

This concept of co-operation is what we might call an economic one because it is based on the theory of human motivation that is at the foundation of liberal politics and capitalist economics – that people are motivated by the desire to maximise their interests and as such will work together only if it is a way to achieve that. It is best summed up by Adam Smith in 1776, in one of the founding texts of capitalism, The Wealth of Nations.

“In civilised society he stands at all times in need of the cooperation and assistance of great multitudes, while his whole life is scarce sufficient to gain the friendship of a few persons.In almost every other race of animals each individual, when it is grown up to maturity, is entirely independent, and in its natural state has occasion for the assistance of no other living creature. But man has almost constant occasion for the help of his brethren, and it is in vain for him to expect it from their benevolence only. He will be more likely to prevail if he can interest their self-love in his favour, and show them that it is for their own advantage to do for him what he requires of them. Whoever offers to another a bargain of any kind, proposes to do this. Give me that which I want, and you shall have this which you want, is the meaning of every such offer; and it is in this manner that we obtain from one another the far greater part of those good offices which we stand in need of. It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages.”

A matter of emphasis

There are two concepts of co-operation used to justify co-operation then: one says co-operation is an end in itself, intimately tied up with ideals like dignity and autonomy; the other says that co-operation is a strategy for self-interested individuals to maximise their own interests.

Sometimes the social conception is used to justify co-operating; sometimes the economic conception; often both are used together, and it’s a question of emphasis.

The recent UK Co-operative Economy 2014, Co-operatives UK’s annual state of the sector report, is a case in point. Like many arguments for co-operatives that are directed at policy makers, journalists and business leaders, it puts the emphasis on the economic concept of co-operation:

“As businesses owned and run for the benefit of their members, co-operatives are controlled by the people with the strongest interest in their long-term future: employees, customers, suppliers or local communities. Because they have a stake in the business and share in its profits, the members actively participate in the success of the business.

“This potent combination of people and participation is a tried and tested formula: People + participation = performance.”

It continues:

“More than just businesses, co-operatives are an international force for good. Across the world they offer people a way to organise themselves and take control of the forces that shape their lives. They give workers power over their jobs and livelihoods, allow small businesses to get a better deal in the market and enable customers to influence.”

On this account, co-operation is a way to create long-termism in business, give people a share of profits, help businesses cut costs, get customer input, boost employee productivity and, ultimately, drive performance. There is a nod to the social good of co-ops but it is vague rather than specific and is largely hidden beneath the economic justification. (Full disclosure: I say this as the person who wrote the 2014 UK Co-operative Economy.)

Co-operatives UK’s report is not alone in mixing the social and the economic justifications of co-operation. The International Co-operative Alliance’s eight new statements accompanying the global marque for co-operatives is similar. They range from ‘co-operative enterprises build a better world’ (a social idea) to ‘a growing and sustainable model of enterprise” (an economic idea).

The two justifications are not mutually exclusive then, though as we see with Co-operatives UK’s report and, indeed, with work from the Employee Ownership Association, Cass Business School, Co-operative Development Scotland and the Ownership Commission – in the UK at least, the emphasis tends to be on the economic concept of co-operation.

Why it matters

Why does it matter which idea is used to justify co-operatives? Ultimately, I think it matters in two ways.

First, which you use matters because in using one justification you pose a challenge to our current economic order whilst in using the other you are reinforcing it.

If you use the social conception you are justifying co-operation as an alternative, a way to change economics and society, to give people control and challenge the way that politics and economics currently operate. Ultimately, it’s a political or even ideological justification for co-operatives. This is exactly what Radical Routes are saying.

If you use the economic conception on the other hand you are not challenging the way the economy or business is arranged but saying that co-operatives are an optimum way to deliver within the current economy. This is what we are saying when we argue, for example, that making employees owners creates more profit or value for the business and the economy.

Second, though, it matters which you use because both pose a strategic question for the co-operative movement at the least, and a strategic risk.

By choosing to use the social idea of co-operation you are making a decision about how to position co-operatives: you are choosing to position them as an alternative to business focused on profit maximisation, one that provides people with inherent goods like autonomy, dignity or solidarity.

Strategically, this is an important decision. It makes it far less likely to be accepted by conventional entrepreneurs, business leaders or those supporting business start-ups and growth. It makes it difficult for business journalists to understand and for most policy makers in liberal governments to advocate or support.

In choosing to focus the justification for co-operation on the social theory you are choosing to position co-ops as an economic – perhaps even political – alternative. In so doing, co-operation is being elevated above a mere business model or way of running an organisation: it puts the focus on co-operatives as a movement for economic, social and perhaps even political change.

There are arguably long terms benefits to this kind of positioning: where practical alternatives to capitalism are sought, co-operatives can prove a powerful option, as we have seen in Argentina, Venezuela and Cuba, for example. There are risks, too, though, in isolating co-operatives; not least that they remain a minority form of organisation.

The Canadian co-operative writer John Restakis puts this strategy well – and hints at the dilemmas – in his account of the Greek workers who have reclaimed, and now run as a worker co-op, the Bio Me factory in Athens:

“Bio Me is pointing to a radically new direction about how the workers of Greece and other failing economies might rethink the strategies of resistance they need to pursue if they are to achieve substantive, systemic change. Protest strikes and street demonstrations are one thing. Factory occupation and production under worker control is a new ball game altogether.

“The Bio Me model questions the very idea of the sovereignty of capital. Equally transformative is Bio Me’s vision of a solidarity economy network that operates outside the conventional market system to support models that rely on a wholly different set of values for serving people’s real needs.

Makis and his fellow co-operators are fully aware of the role they are playing in the effort to re-imagine what an economics of equity and justice might look like. And they are under no illusions as to the enormity of the task ahead. But as he said with a characteristic shrug of his shoulders, “What alternative is there? What else can workers do?””

If, on the other hand, you choose to justify co-operation on the basis of self-interest the benefits are much more immediate and tactical. Insofar as there is evidence that co-operatives are more productive, create economies of scale or better services, then it is easier to explain to business, the media and policy makers why the co-operative model ought to be used and supported. This, of course, is why lobbying organisations like Co-operatives UK and reports aiming to influence policy like the Ownership Commission’s adopt this approach. Appealing to the dominant frame in which enterprise is understood is the way to ‘mainstream’ co-operation.

But there is a big strategic risk with this too. If co-operatives are of value only because they help people maximise the interest of individuals or firms – whether creating more productive businesses or enabling businesses to cut costs – then they are open to that result being delivered more effectively by another organisational form or model.

If, for example, the only reason why businesses should be owned by their staff is because it makes those staff more productive then if, say, new technology could increase productivity further then that may render the need for co-operation redundant. Similarly, if the benefit of co-operatives is to cut costs for individual businesses, then if a new and more efficient way to cut costs is found, co-operation may no longer be needed.

Arguably this is exactly what happened to the building societies in the 1980s when legislation was introduced enabling them to demutualise if the members voted in favour. If building societies in the 1980s had justified their role on the basis of providing an institution owned and run by normal people who benefit from and control it, it is unlikely that the offer of a small cash incentive (typically £500) would have enticed the members to vote for demutualisation. But, because building societies justified themselves to their membership on the basis of serving their economic interests – providing them with an account, a mortgage, interest and so on – as soon as what appeared to be a more efficient way of meeting their interests came along they opted for it.

This is not the only reason for the mutualisation of building societies, but it does illustrate the strategic risk in justifying co-operative (or in this case, mutual) ownership on the basis of serving self-interest.

To finish

I’d like to conclude with three things.

First: a recap. My point in writing this has been to clarify something that I think many of us know but haven’t taken the time think through fully. Explanations of why co-operation is a good thing tend to fall on one two justifications: either co-operation gives people dignity, autonomy and control over their lives, or it is a way for people to maximise their interests, or a mix of the two. Those which put the emphasis on the former social conception are making a strategic decision to position co-ops as an economic alternative whereas those which put the emphasis on the latter economic conception are making a strategic decision to position co-operation as one efficient way to maximise individual interests.

Second: a call to action. My call to action is for people promoting the co-operative model – whether campaign bodies, activists, national organisations, lobbyists, individual businesses – to give serious thought to whether they are using an economic or a social justification for co-operation. It matters, a lot. Their choice will impact upon how the co-operative model is positioned and could affect the long-term future and viability of the co-operative movement.

Finally: an opinion. I think, in the end, putting too much emphasis on the economic conception of co-operation is the biggest strategic risk to the co-operative movement.As long as co-operation is justified as a way to maximize self-interest in certain situations, it will always be susceptible to being superseded by other methods of maximising self-interest more effectively. And in a capitalist economy, when new technology is transforming the business landscape every few years, that is too big a risk to take.

This is not to say that the economic justification should be shelved or ignored. But it is to say that too much emphasis on co-operation as a means for maximising self-interest is a strategic risk that in the long-term may put the co-operative movement as a whole on a less solid foundation.

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Is the co-operative movement a social movement?

I’ve just returned from the International Co-operative Alliance’s Global Conference, spending a week with 1,000 supporters of co-operatives from around the world.

One of the most fascinating parts of the events was hearing large businesses explicitly aligning themselves with a movement for social change. It wasn’t unusual to hear people like the President of the largest healthcare insurer in France say, for example:  ‘We are kidding ourselves if we think we can be a social movement without a stable economic footing.’

Yet I left the conference feeling a little troubled. Not troubled by the people who were there, or what I heard and felt there. Everyone I met believed in a co-operation, in the possibility of a fairer world, and in co-operative business as a means to the bigger end of social change. It was incredible.

But troubled about the fact that there is a big difference between those attending this conference – and their passion for social change – and what you see day-to-day in the wider co-operative world.

And on reflection, I think that sense of trouble stems from the distinction that we in the co-operative world don’t draw clearly enough: between co-operative businesses and the co-operative movement.

Co-operative businesses are individual businesses, trading in the market and doing what they can to give their members, ownership, control and a share of the profits.

The co-operative movement is a collection of people who share similar ideals of what a better world would look like, and see co-operative businesses as a means to achieving this fairer, co-operative world. You might say they subscribe in form to the ideology of ‘co-operativism’.

Co-operative businesses have certain elements of that ideology written into their constitution – member control, democracy, sharing profits and so on. And some of them are incredible, inspiring examples of businesses committed to their members AND to something far, far bigger. But unless a co-operative business explicitly allies itself with others and this wider vision of a better world, it is simply an isolated businesses.

You can’t really call these isolated businesses part of a movement for a better world when they don’t advocate such a better world.

I don’t know how many co-operative do promote or subscribe to this vision of a co-operative society. But I’d guess there are a lot of co-operative businesses – perhaps even most – out there that don’t. And if this is true for the founders, directors and managers of these businesses, it’s likley to be even more true of the wider membership.

There are, I think, a few very important implications here.

First, it means the co-operative movement is probably not as big as we say. There may be 1 billion co-operative members worldwide, but how many subscribe to a vision of a co-operative society? If we’re honest, how many actually know there is such a movement, or that co-operatives provide an ideological alternative?

Second, and out of step with the now-dominant idea that co-operative businesses should be ‘mainstreamed’, we should see the co-operative movement as a political movement, Not party political, but a movement that aims to bring about a shift in the way the economy is organised. Individual co-operative businesses are important, but they are actually just the means to a much bigger and more important end.

Third, whilst advocating and campaigning externally is crucial, a campaign by the co-operative movement aimed at co-operative businesses and their members is just as urgent; perhaps more so. If we can persuade those co-operative businesses – and perhaps even their active members – that co-operation is not just a good way to run a business but is a good way to arrange society and the economy, then we will start to build a bigger and stronger co-operative movement.

Airports, orders and why co-operation requires democracy

I’m flying to the ICA’s General Assembly today, after a few delays. I’ll be running sessions, reporting, co-ordinating some social media and having a stand. It’s a rare event, so I’m planning to blog each day.

So here’s my thoughts from day one – the not-yet-complete journey:

All over Heathrow airport are signs saying ‘thank you for your co-operation’ and, after a mechanical fault on our plane which ended in everyone disembarking, we were asked to be calm and ‘co-operate’.

It’s interesting to compare the use of the word here with its use in co-operative businesses: it illustrates just why co-operation requires democracy.

The Oxford English Dictionary definition of the word ‘co-operation’ is ‘the action or process of working together to the same end’.

The airport’s assumption is that everyone wants the same end – for the wait to be orderly, for disembarking to be safe.

But the airport doesn’t know what people want: it hasn’t asked them; it’s just assuming that they want things to be safe and orderly.

So what the airport is really saying is that it would like everyone to comply, to do what it wants because it thinks it’s the best thing for everyone.

The airport may be right – it might be best to wait and leave in an orderly way. But not everyone has agreed, nobody has been asked, there has been no discussion or decision. It’s not really co-operation in the sense of people working together towards the same ends.

When we talk about a ‘co-operative’ business what we mean is a business that is run by the people – the members – who are working together towards the same end.

The implication behind this is that the members have talked to one another, deliberated and arrived at an agreed end. Without this, they wouldn’t be working together towards the same end, they’d be complying by following the dictate of a few or pursuing a variety of different ends. Without it, they wouldn’t be co-operating.

So, talking, deliberating and arriving at an agreed position – what effectively amounts to democracy – is necessary before you can start talking about some thing being co-operative.

Without this democratic deliberation and agreement, co-operation, working towards a common end, would not be possible.

The question for a co-operative business, then, is how far is it practicing democracy? Is it guided by its members who have talked to one another, deliberated and agreed a common end? Do all members input, or just a few? Is that an agreed process?And how many members need to debate and agree for that to count as a common end?

This isn’t a small issue. If co-operatives are to avoid being like the airport that asks people to co-operate but means comply, then democracy is essential.

Workshops and artists

A review of The Craftsman by Richard Sennett, 2008

Richard Sennett’s ‘The Craftsman’ is not a management or business book in any conventional sense. It reflects on the history, sociology and philosophy of what a craftsman is. It doesn’t claim that it can revolutionise your business, or offer easy solutions.

But it does provide a thought provoking argument about the importance of teams and co-operation in the workplace.

Sennett begins by pointing out, through detailed analysis, that a functioning workshop is a place where a team works together under the leadership of experienced masters who pass on their skills and knowledge, developed over time, to their apprentices.

And this, of course, applies as much to medieval goldsmiths as to nurses or computer programmers – working units where teams specialising in an area work closely and learn together.

Sennett then goes on to look at some of the benefits of workshops, drawing them out through an analysis of the difference between the lone artist and the craftsman in the workshop.

Sennett says that the two are distinguished by three things:

– By agency: the work of the lone artist is guided by that one person’s ideas and drive, whereas the workshop is guided by the acquired history, skills and knowledge developed by the master and shared collaboratively with the team.

– By time: artists have a flash of inspiration, it’s intuitive, not tested, whereas workshops craft products that have been developed and passed down over hundreds of years, doing the work slowly and carefully.

– By autonomy, but surprisingly so: the lone, original artist has less autonomy, is more dependent on the whims and fancies of funders and customers and so is more vulnerable than craftsman who are working in a tried and tested area, with others who together can share ideas.

The individual artist has historically, and is today, elevated above more common place crafts. Craft is viewed as unoriginal, somehow less valuable than art. And in the modern workplace the sudden bursts of creativity of an individual are celebrated above team crafted products.

But what is clear from Sennett’s analysis is that the more durable framework for a sustainable business is the workshop, where the workers work together, develop common and enduring skills in similar areas, rather than competing on who can be the best and most successful, creative individual. Let’s look at the distinguishing features again:

– Agency: in a workshop, it’s the team as a whole through close working and engagement which develops ideas or products, rather than one or two people, meaning that it’s better tested, understood and supported than those developed by a striving, competitive executive or individual.

– Time: new ideas or products or strategies are developed based on experience, testing what works, not a sudden burst of inspiration by an individual aiming for a bonus

– Autonomy: members of the team have a sense of control over their part of the work, stability and confidence that they will have employment in the future and so feel a much bigger commitment to the organisation than a group of individuals competing against one another for promotion or demotion.

We sometimes hear in management theory and business that individual competition rather than collaboration most effectively motivates people to work well.

But what’s clear from Richard Sennett’s analysis is that the successful, sustainable business provides, to some extent, a structure to engage and involve teams, enabling them to spend time learning and developing tested products, rather than a structure where individual creativity, inspiration and action is rewarded.

The examples he cites are Japanese factories, but you might also mention Gore, Nokia, John Lewis, Google . . . The examples of the importance of the craftsman and workshops to business success are everywhere and growing.