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Is there a co-operative alternative to capitalism?

Dan Gregory
Dan Gregory, posted on 27.11.12

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Congratulations to our ClearlySo associate Dan Gregory, who has won first prize in the Ethical Consumer Magazine and Co-operatives UK for his essay "˜Is There a Co-operative Alternative to Capitalism?'. It's a thought-provoking look at the relationship between the public, private and social sectors. We recommend you read the full version here.

Here is a brief summary of some of his ideas:

Slovenian philosopher Slavoj Zizek, in his 2010 book "˜Living in the End Times' suggested that it is "easier to imagine the end of the world than the end of capitalism".  But this possibility of an alternative has become easier to imagine.

Our model of "˜actual existing capitalism' is presently failing to deliver on its own core promises of growth, employment, returns to capital, material security and stability.  And the negative externalities which the market mechanism generates are now frighteningly large, and seemingly growing.

Inequality continues to rise in the UK and further afield; the riots of 2011 bear witness to bubbling social tensions; environmental uncertainty, child poverty and mental health problems are not going away, and if anything, are increasingly worrying. Over 40% of the economy now falls under the command and control of the public sector, funded mainly through taxation, in a seemingly hopeless attempt to mitigate the social and environmental fallout of market failure.

We can't leave it to the market alone to deliver social and economic wellbeing but neither have we found an effective way to step in and pick up the pieces through public interventions. At best, then, our capitalist system is operating at 60% efficiency.

So is it possible that a co-operative model could offer us remedies to these maladies?

First, in the private sector, private enterprise does not appear to delivering the returns which capitalism expects. Yet co-operatives and social enterprise which eschew conventional capitalist forms of ownership, perversely, have been financially outperforming red-blooded businesses within their own capitalist game.

Second, the free market is not very free and the dominance by a handful ofbusinesses of our food retail, banking and energy sectors demonstrates the increasing concentration of ownership in the private sector, the presence of oligopolies, barriers to entry, and the stifling of new enterprise and diversity. Yet co-operatives can offer two solutions to the anti-competitive conundrum. On one hand, as their ownership is intrinsically less opposed to their own subdivision into smaller units: with subsidiarity and democracy at the heart of the co-operative model. Equally, many co-operatives and social enterprises provide a defence against takeovers and conglomeration through an asset lock, democratic ownership or disallowing dividends. On the other hand, co-operatives can sidestep the anti-competitive problem by turning such behaviour into a virtue!

Co-operation and collusion are of course two sides of the same coin. Observing from a distance the assumption in the Competition Act, in EU law and inside the Competition Commission that being anti-competitive is a bad thing reveals policymakers', economists' and regulators' blinkers. Co-operatives are bound by their principles to co-operate for public benefit rather than collude for private interest. This enables us to imagine a world other than the inhuman one into which we have stumbled where co-operation - let's spell that out, "working together" - is an illegitimate and illegal activity.

Third, private businesses' increasingly narrow and short-term focus on a single, financial bottom line logically results in a corresponding rise in externalities. Whereas co-operatives and social enterprises are set up with a responsibility to worry more about the externalities of their trading activity. Their wider obligations beyond the purely financial offer the promise of a less crass and rampant capitalism and instead, a more humanised economy in which businesses price in environmental and social costs.

Fourth, we don't really know if the private sector is failing or not, as our economic dashboard has become disconnected from our vehicle and the multiplication of intermediaries have ruptured the connections between signifier and signified.  But the co-operative model provides an exit route from the pointless (or worse dangerous) dead end of post-modern economics, not by retreating to traditional models but through turning to each other. Under co-operative ownership, financiers and owners are also the consumers or producers. As one and the same, or as peers, they are therefore connected in a more meaningful way than, say, the relationship between a supermarket shopper in the East Midlands and a trader's spread sheet in Boston.

But the failures of actual existing capitalism rest as much with the public sector as with the private. Both taxation and regulatory interventions could be more intelligently constructed in order to create a more co-operative relationship between the state and the private sector, working with business to incentivise the reduction of negative externalities in order to achieve policy goals in return for fiscal or regulatory rewards.

The social sector too suffers from a number of flaws and failures. First, as it relies to a massive degree on the other two sectors. Second, in accepting, albeit often reluctantly, the pervasiveness of the market mentality, the sector is increasingly tending towards the methods and mind-set of competition, yet with no corresponding benefit to society.

So a case can be made that imagines a more co-operative economy, in the sense that each distinct sector adopts a more co-operative approach - with co-operative businesses taking a higher market share and organisations in the public and third sector mutualising or embodying more co-operative principles. Yet this is only a co-operative alternative to capitalism in a limited sense - simply more co-operative actors playing the capitalist game. As far as it goes, this is perhaps not so hard to imagine.

But from a more fundamental perspective, which may be as difficult to conceive as Zizek suggests, such changes could be a stepping stone to the transformation of the relationships not only within but between the sectors, and the creation of a system of production that could be defined as an alternative to capitalism - or co-operativism.

The interrelation between sectors is important for the on-going viability and sustainability of the UK's economy and society. Yet this dynamic between sectors is bafflingly ignored by economists and demands greater consideration, especially as our two sectoral giants are currently practically bankrupt, if not technically insolvent.

The UK economy can be highly inefficient when these three different sectors work selfishly and destructively in opposition.A co-operative alternative to "actual existing capitalism" would recalibrate a co-operative dynamic between sectors rather than the current competitive and antagonistic tension. This means players within the system realising through enlightened self-interest that they will each benefit from working more effectively together to create a more successful, balanced and mutually supporting democratic mixed economy.

So is there a co-operative alternative to capitalism? Perhaps not, if what we mean by capitalism is a mixed market economy. But the answer is almost certainly yes, if we are in the market for an alternative to "˜actual existing capitalism'. A more co-operative approach could potentially deliver a more efficient, human and harmonious market economy in a world with ever scarcer resources. A co-operative economy can be in both our common and our self- interest. As Robert Owen says "the union and co-operation of all for the benefit of each." Imagine.


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1 comment so far.

Blog comments Jeff Mowatt, 14.12.12, 14:07

Clearly there is. What's interesting perhaps is that in 2004, ICOF the funding arm of the coop movement and Social Enterprise London had no interest: http://economics4humanity.wordpress.com/2012/05/28/capitalism-is-an-insufficient-economic-model/