Circling the drain
The Co-op faces demutualisation by a thousand cuts, argues Paul Demarty
There is no end, it seems, to the public humiliation of the Cooperative Group. It has, in the last couple of years and particularly the last year, been barrelling towards oblivion. It is a story that has everything: good intentions turned to dust, a noble cause run aground on recalcitrant reality, even rent-boys and crystal meth.
The latest dose of chaos comes courtesy of Paul Myners, former City minister in the fag-end of the New Labour years, and before that chair of the Guardian Media Group. He was appointed to the board of the Co-op four months ago, as the reality of its disastrous financial position began to dawn. It was his job, as it often is for big-name hires, to declare that ‘things are going to change around here’: he concocted a detailed plan to overhaul the governance of the group, and rather rudely trailed it at his old stomping ground, The Guardian, with a sharp attack on the chaos at work in the Co-op.
Now, Myners himself has resigned in high dudgeon, in the wake of the forced exit of three other board members. The sins of the latter had been to award a tidy £6.6 million pay packet over two years to CEO Euan Sutherland, including £3 million worth of “retention payments”, as a reward in advance for kindly not quitting his job. When news of this absurd package leaked to The Observer, Sutherland quit, retention payments be damned; and unwelcome attention began to focus on the three board members who sat on the remuneration committee, leading to their ousting.
Exactly why this should function as a shot across Myners’ bow is not immediately clear; but is illuminated by the plans this City grandee was making for the Co-op. The group is currently run by a board of directors consisting of 20 elected representatives - 15 from various regional co-ops, and five from major ‘independent’ societies trading under the Co-op brand. These people appoint the executives, and are - in theory - accountable to their members, albeit typically via Byzantine arrangements closer to the base.
Myners, who learnt his trade with Rothschilds, finds this structure intolerable. The worst of it is that the board is composed not of people who are competent at business, but people who have wormed their way up the zombified democratic structures. He proposes scrapping the board, replacing it with a more typically corporate arrangement, and a ‘members council’ which would, in his words, “have the power and resources to commission and publish reports on the adherence to cooperative standards and ethics, and it will be able, when necessary, to publish reports criticising the board” (The Guardian April 14).
Translated into English from boardroom guff, that means it will have no power at all (the power to gripe is available to everyone with the wherewithal to set up a Twitter account) - something not lost on the folks who currently make up the board, who have generally reacted frostily. While Myners remains on the staff to conclude his “independent review” (“I represent no-one except common sense,” he declares, with incomparable modesty), many in the group will wish to kick it into the dirt; like the sacking of the remunerators, Myners’ frustrated exit represents a reaction of the Co-op establishment against those whose response to the group’s crisis is to demutualise it, in substance if not in form, and turn it irrevocably into ‘just another’ competitor to Tesco.
His frustration has the limited justification that the current situation is transparently unsustainable. It was not this former City big-shot and City minister that first nudged the Co-op onto the City’s economic territory, after all. It is currently suffering the after-effects of a wave of acquisitions that, in the event, turned out to be unwise. It picked up the Britannia Building Society in 2009, and thereby inherited a great wodge of concealed toxic assets; this led to a crisis in the Co-op’s banking arm, which spiralled out of control.
With such a gaping hole in the balance sheet, and obvious ‘governance’ shortcomings exposed during the public breakdown of Paul Flowers, the ‘crystal Methodist’, credit ratings agencies downgraded the bank to junk status. Much of the stock has now been sold off to the same unscrupulous high-finance institutions to which it was supposed to provide an ‘ethical’ alternative.
It has become increasingly clear that the damage has spread throughout the group, landing the food retail and other operations in serious difficulties. The Co-op is expected to post losses of a staggering £2 billion soon - remember, this is not Microsoft we are talking about, or some other blue-chip mega-company with unlimited cash reserves. £1.5 billion of that number is accounted for by the banking arm, leading to the possibility of another fire sale. We cannot expect the fratricidal goings-on at the top of the Co-op to continue much longer: if the schemes of a Paul Myners will not put them to an end, then an administrator will.
We are not indifferent to the possibility of the Co-op’s doom. It is hardly an accident that the Paul Flowers scandal sucked in the Labour Party: partly, of course, the rightwing press likes to fling any mud it can get at Labour (and crystal meth is a good bit of mud to sling, having supplanted heroin and crack as the signature drug of irreversible moral collapse). On the other hand, however much it likes to dress up as a run-of-the-mill food retailer, the Co-op is an integral and substantial contingent of the labour movement.
The first cooperative to offer a dividend to its members was the Rochdale Society of Equitable Pioneers, founded by weavers, and its principles of organisation inspired the foundation of the Cooperative Wholesale Society, which evolved eventually into today’s Co-op. Its political wing, the Cooperative Party, was founded by happy coincidence in October 1917, and has run candidates jointly with the Labour Party since 1927. The building of producers’ and consumers’ cooperatives, more broadly, has been a concern of the workers’ movement since its infancy, with major strategic trends - such as Proudhonism and Lassalleanism - founded on the pursuit of effective cooperative production.
Marxists do not share the enthusiasm of a Proudhon for cooperatives, but nor do we dismiss them sniffily. They are a proven defensive tactic on the part of the working class, against the monopolistic and immiserating tendencies of capitalism. In spite of its present dire straits, the Coop is a historic gain for the working class in this country, which has been steadily expropriated over decades and now faces oblivion.
It is a matter of some regret that cooperatives, like many other historically significant aspects of working class organisation, are abandoned by much of the far left, which maintains a myopic focus on the trade unions. This stems from economism, which venerates the spontaneous and direct struggle of worker against employer, as against the variegated forms of struggle - economic and political - of the working class against the capitalist class.
The historic blind spot of economism is the battle for democracy, which manifests in two ways - in the workers’ movement and at the level of society as a whole. In the case of the Co-op - a part, for better or worse, of our movement - it is clear that the steady ossification of the group tracks the rollback of the movement as a whole, and the progressive bureaucratisation that goes along with it. The Labour Party is more stitched up than ever. Assaults on the trade unions have had the net effect of strengthening the officials as against the rank and file.
The Co-op, meanwhile, has been drawn into capitalist competition with the dominant forces in comestibles and retail banking. It has positioned itself less as a workers’ alternative to Tesco, but as an attractive outlet for ‘ethical consumerism’ and other such 21st century liberal hoodoo. This transformation has been effected both by its own, more corporate strategic plans, and the blind forces of the market, and direct political pressure (it was seen as a PR-friendly face to take over struggling enterprises by the last Labour government). The roll-call of its MPs does not inspire great confidence either - Ed Miliband is a member of the Co-operative Party, as are the vast majority of its shadow cabinet; and Ed Balls was formally endorsed by that party.
The complex financial instruments which caused the Co-op’s crisis may seem a world away from the commonly owned regional wholesaler founded 160 years ago, but even that bears striking similarities with other contingents of the labour movement. Last year, the TUC, Unite and Unison formed the Trade Union Share Owners Group, which attempts to ensure that the combined £1 billion of pension fund investments do not find their way into ‘unethical’ enterprises. Knowing the absurd complexity of pension funds, we can only wish them luck (as an aside, Unite - which represents 1,200 Co-op workers - urges the acceptance of the Myners recommendations).
Alex Andreou, writing in The Guardian, gets close to the nub of the matter when he describes the Co-op’s problems as a matter of finding “the golden ratio between democracy and efficiency, between growth and health, between ethics and profit” (April 11). Certainly, that has been the game plan of the Co-op’s latter day leaders - to grow a run-of-the-mill capitalist enterprise, while still holding onto its ‘values’.
The problem is not, however, that it has yet to find that golden mean, but rather that no such mean exists. Cooperatives have the potential to serve as an expression of the political economy of the working class against capitalism, or they may become straightforward capitalist enterprises (as with the demutualised building societies).
The Co-op refuses to choose. It has been sucked into the rigged game of high finance and retail monopolies; but it is structurally unable to play that game effectively, and so it comes to pass that another component of the working class movement circles the drain.