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Cooking the Books: Co-ops Again

Despite the capture of the Co-operative Bank by hedge funds and the exposure as hypocrisy of its claim to be more ‘ethical’ than other banks, there are still those who stubbornly argue think that co-operative enterprises could be a viable alternative to capitalism. Supporters of capitalism, however, have a more realistic view of co-operatives and what they can and cannot do within capitalism.

One of the arguments put forward in favour of co-operatives is their democratic management structure. They certainly are more democratic than any normal capitalist enterprise which are anything but this. The moment an employee enters the doors of the office or the gates of the factory where they work they cease to be ‘free citizens’ with a right to vote and become subjects who have to carry out the orders of the unelected managers who are running the business on behalf of its owners.

Under capitalism, however, not being undemocratic is a handicap for an enterprise. Even a nominally democratic structure hinders the emergence of the type of ruthless top executive needed to engage in the struggle with rivals with any chance of success.

This was spelled out clearly in an editorial in the business section of the  Daily Telegraph (20 November) commenting on the Co-operative Bank and the Co-operative Group generally:

‘Its democratic structure, with a Byzantine relationship between area committees, regional boards and the group board, was held up as a paragon of virtue. It was, as has been proved, a recipe for disaster … It is difficult to imagine any corporation of this magnitude being governed by archaic governance standards more suited to a village charity than an organisation with its sites on major expansion.’

Like it or not, it’s true. The sort of decisions that the top executives of an enterprise engaged in the competitive struggle for profits have to take are impeded if they are subject to any degree of democratic control. A democratically-run enterprise just wouldn’t survive in the capitalist jungle. If you want to compete with the other beasts in the jungle you’ve got to behave like one of them.

This has been candidly recognised by the president of the much-touted Mondragón co-operative group (one of whose flagship enterprises has since gone under), Txemia Gisasola, when he told Miles Johnson the Financial Times (21 March):

‘We receive visitors from many companies and many countries, and some come here with a magical idea of what Mondragón is. This is not magic. We are in this market, competing in the capitalist world, and the only difference is how we do things and why we do things. We have to be competitive, we have to be efficient, we have to have quality in our products and give satisfaction to our clients, and we have to be profitable. In that sense we are no different from anyone else.’

This does mean that there is no place at all for co-operatives within capitalism. There are some niches for a few of them, but they can never spread to take over the whole economy as their more romantic supporters envisage. As the Times put it (18 June), ‘co-operatives are a model for a few companies, but not for an entire economy.’ Co-operatives are in fact not at all an alternative to capitalism, just one form of capitalist enterprise and a not very efficient one at that.