I try not to talk about business news on this blog too often. Though I follow the affairs of the corporate world with interest, my opinion of them seldom varies: the majority of large businesses in Britain and the United States take more from us than they give. Senior executives are paid too much and ordinary workers too little. Private equity firms are the scum of the earth. But we’re all familiar with the flaws of modern businesses. We also know of some of the recent positive developments, such as the ‘ shareholder spring’. Sadly it is bad news that I am examining today.
The Co-operative Bank is in trouble. A wholly-owned subsidiary of the Co-operative Group (the largest co-op in Britain, with 6 million members and divisions for supermarkets, pharmacies, travel agents, funeral directors, car sales, insurance, legal services, clothing, technology shops and banking), the institution has run into trouble after rescuing the ailing Britannia Building Society in 2009. Britannia was one of the larger building societies which didn’t demutualise like so many in the 80′s, 90′s and 00′s, but expanded into risky markets such as lending to large businesses. Only now has the full scale of the ‘toxicity’ of remaining assets become clear: Britain’s sixth biggest bank needs to fill a £1.5 billion hole in its balance sheet.
This is not such a large deficit that savers are at any risk. It is only creditors, not depositors, who may lose some of their capital. The Co-operative Group has worked with state regulators to devise a ‘bail-in’ that will put the bank back on its feet without taxpayer funding or support from the wider Group. But at what cost will this be achieved? The conversion of bondholders’ capital into shares which can be traded on the London Stock Exchange. They’re demutualising the Co-operative Bank.
Now, this might not be so bad. The Co-operative Group will remain the majority shareholder, allowing it to retain the emphasis on ethical finance and customer service that is the hallmark of the Co-op. But is that realistic? With shareholders to consider, the bank will pursue profit. Simple as that. Out with the unprofitable stuff like ‘making the world a fairer place’ or the provision of free fairtrade coffee to customers. And what happens when the Co-operative Group wants to grow? There’d be tremendous pressure to chip away at its shareholding in the hived off bank.
The co-operative movement is an important one- and it is intertwined with the labor movement. I’ll explain with an example. The Co-op originated as the Co-operative Wholesale Society in 19th century Manchester. A small group of people realised that in the newly industrialised economy, the working people could only improve their lives of intense hardship if they came together and pooled their purchasing power to negotiate lower cost, higher quality products and services from the capitalist class, and eventually supersede them. A society was needed in which the poor would support each other from the cradle to the grave. And so the CWS, built on the same principle as the welfare state a century later, was born. Affordable, filing food would be bought and sold to working men to sustain them in their hard labor. Families need not be crippled by funeral costs if a non-profit funeral insurance service was provided. And then, when families could scrape together some savings, they’d deposit it at a bank that accepted low-income customers.
The demutualised Co-operative Bank would have no right to retain the name that is associated with such a clear set of ideas. No capitalist institutions do.
Furthermore, the only way the proletariat, working classes, 99% or whatever you want to call them, is able to hold its own against commercial interests is to organize into groups that match the scale and influence of them. In the workplace, that meant trade unions. At the ballot box, it meant the Labour Party or its predecessors. And in the High Street, it meant cooperatives. And though the world has moved on, we face a return to the need for similar solutions today. In the 21st century, the internationalisation of the struggle for justice is what’s needed. International competition on labor costs, tax rates and regulation will erode our living standards unless people and organisations work across national boundaries.
On a less philosophical level, the Co-operative Bank provides a valuable alternative to its exploitative and corrupt rivals which dominate the banking maket. Without the Co-operative, there remains only a small number of building societies and credit unions within the mutual sector. As I have said before, mutuals should and will be a huge part of the global economy of the future. The power of the guardianship of such vast sums of money as a bank does has been used to great effect by the Co-op. Without somebody striving to do what’s right, a better future slides that bit further out of reach.
That’s why I’m appealing to both members and customers of the Co-operative Group to contact them and demand that they look at alternative options to selling one of their- our- two symbolic divisions. Could the sale of our travel agency plug the gap? What about merging the bank with another building society? And if no alternative presents itself, then at the very least we should ensure that a sold entity does not use the co-operative name. That name is above that of commercial interests.
