Socialist Worker

Capitalist logic has skewered the Co-op

by Alex Callinicos
Issue No. 2399

The Co-op staggers from disaster to disaster. It lost control of the Co-op Bank after the bank’s chair, the Rev Paul Flowers, was exposed as incompetent and accused of allegedly taking drugs.

Then the group chief executive, Euan Sutherland, and an independent director, ex-Labour minister Lord Myners, both resigned. They left complaining about the resistance of the elected representatives on the board to their efforts to turn the Co-op into a normal business. The Financial Times snootily noted that the board includes “a plasterer and a nurse”.

The conflict arises from the very nature of the Co-op. It originated from a movement that represented the efforts of groups of working people to create islands of order and decency amid the competitive chaos of Victorian Britain.

Robert Owen, the originator of the cooperative principle in the early 19th century, sought to apply it in production. 

He believed that producers’ cooperatives would be both fairer and more efficient than capitalist firms and that they would gradually spread till a classless communist society was established.

In practice, co-ops were most successful in distribution—setting up cooperatively run shops where working-class people wouldn’t be cheated—and in finance, through the creation of credit unions where workers could pool their savings. 

Here lay the origins of the modern group, which has 90,000 employees and 450 shops.

But it is still a movement, with eight million members, and about 80 member societies. Their representatives choose 15 out of the 21 members of the group’s board. There is also a Cooperative Party affiliated to Labour that sponsors 32 MPs.

The “Rochdale principles” that govern the Co-op state: “Co-operatives are democratic organisations controlled by their members, who actively participate in setting their policies and making decisions.” Nothing could be more alien to how a capitalist firm works.

Karl Marx and Frederick Engels admired Owen and praised the producers’ cooperatives of their day for showing that communally run production was superior to capitalism. 


But as Marx wrote in Capital, “they naturally reproduce in all cases, in their present organisation, all the defects of the existing system.”

The crucial problem is that co-ops may be cooperatively and democratically run, but they seek to succeed on the capitalist market. This means that they are governed by the logic of competition.

There is tremendous pressure to internalise this logic, which replaces democracy with hierarchy. The anarchist economist Michael Albert pointed out that a co-op is most brutally tested when it gets into trouble and must lay workers off. 

The temptation will be to hire a manager who demands greater power and pay as a reward for doing the dirty work.

We see this logic exactly at work in the Co-op. During the bubble years before the 2007-8 crash the bank began to imitate its rivals and expand dangerously. Because it survived the crash, the top executives became even more ambitious and tried to buy (with the Treasury’s encouragement, according to Flowers) 632 Lloyds Bank branches.

In the end the Co-op Bank itself had to be rescued, with its creditors, mainly hedge funds, taking 70 percent of the shares. Last week it emerged that the bank’s new chief executive, Niall Booker, is set to receive £4.6 million for his first 18 months in the job—four times what his predecessor was paid.

This is despite the fact that the bank recently discovered it needed £400 million—in addition to the £1.2 billion already put in—to cover losses.

Now the fight is on to force the main Co-op Group, which is expected to announce losses of £2 billion or more this week, also fully to embrace the logic of capital. The Financial Times is leading the campaign, describing the Co-op as “caught in a time warp” and sneering at “Keystone co-ops”. 

Whatever the Co-op’s faults, these demands are absurd. It is being asked to assimilate to the “professional” form of business organisation prevailing among the banks whose blind greed nearly blew the world economy up five years ago, and whose employees have been caught committing multiple scams. 

In comparison to the giants of Wall Street and the City, Rev Flowers is a mere amateur bungler.

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Alex Callinicos
Tue 15 Apr 2014, 19:08 BST
Issue No. 2399
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