According to today’s quarterly announcement on economic growth the UK economy has grown by 0.8%.
Cue the usual debate: Are we pulling out of the financial crisis now? Is the government getting it right, or still holding us back? Are people spending again? Is it because of exports, holiday season, better weather? Can business owners feel more confident?
The usual debate, though, obscures the important questions we should be asking.
A focus on growing national GDP might have some positive effects (although there’s an argument to be had there) but there’s much more that we’d like to see growing in our economy beyond GDP. Are people getting a share of the wealth generated? Do people have any control over the businesses? Do people have decent jobs? Is the economy working for the majority, or just a small group?
So perhaps, alongside the quarterly growth measure, we should have some other kind of alternative growth index: one that tracks how widely the benefits of growth are spread in the UK.
Indicators for this kind of growth could be fairly straightforward, for example:
- Number of direct shareholders of PLCs
- Number of co-operative and mutual members
- Number of micro-enterprises
- Average wages at different bands and levels
- The size of average pay ratios
- Feelings of engagement at work
This is just a starter.
The point is, if you were to combine these, you would get a sense of whether or not the share of ownership and wealth in the UK is growing. And that would be a far more meaningful form of growth to measure in the economy.
So, the Co-operative Bank’s rescue bid – which involved a partial flotation on the stock exchange to raise capital whilst The Co-operative Group retained around 70% ownership – has failed.
Following very difficult negotiations, it now looks like the majority of shares in the Bank will be held by institutions, with The Co-operative Group retaining just 30% ownership.
There is – and will continue to be – an inquest into the causes of the problems that led to this. Hubris, failed expansion plans, disengaged members, executive failings and much else will surely turn out to be factors.
But what perhaps hasn’t been said, in simple terms. why it matters. For what it’s worth here, I think, is why it matters.
To society. The Co-operative Bank has been arguably the biggest force for good in the UK banking sector for the last 20 years – a prominent ethical bank that led the way on ethical investment and sustainability. Without it there will be less of an ethical counterpoint to standard banking practices.
To customers. The Co-operative Bank provided an alternative for customers, offering them an accessible mainstream bank where they could feel good about what their money was being used for. There are other ethical banks, but all are small and niche; there may be no easily accessible alternative anymore.
To co-operatives. The Co-operative Bank was perhaps the defining brand of the co-operative sector in the UK – when people think about the word co-operative they think about an ethical leader. In the short to medium term, this association will be damaged by the Bank’s problems.
To the economy. The tragic unfolding of events stem from a deeper problem – that the institutions governing banks and business favour one model of banking, despite the fact that the model has been shown to fail since 2008. Specifically, in this case, Standard and Poor’s downgrading of the Bank was partly a consequence of the rating agency ignoring the capital available to The Co-operative Bank because it was owned by a much larger Co-operative Group. A major catalyst for these problems was the blinkered view of acceptable banking practice.