Towards a theory of co-op capitalism

Original

business and industry, economy, political ideas

Author(s):  Noreena Hertz
Published date:  15 Feb 2012
Source:  IPPR

There are some economists who argue that despite the traumas of the global recession, capitalism will look the same in five years time as it did before the crisis. I disagree. I think there is a new form of capitalism waiting in the wings which will emerge as an alternative model. I’ve called it ‘co-op capitalism’ and I think it can succeed where ‘Gucci capitalism’ – so called because of its emphasis on brands, status, and monetary wealth – ultimately failed.

What does co-op capitalism look like? Here are five of its defining characteristics:

The collective is valuable

Whereas Gucci capitalism values the individual above all else, co-op capitalism sees value in the collective. This means outcomes such as inequality, or policies such as the selling off of public space like forests to private corporations, are seen as corrosive and detrimental. This is not just because of their impact on individuals but because they also harm social cohesion and the collective which itself is perceived as valuable. Co-op capitalism believes that public goods must be managed in ways to ensure fair access and use by all.

How we interact matters

Gucci capitalism is concerned only with the outcome of transactions and not with their nature or the process. Co-op capitalism, on the other hand, recognises that the quality of relationships – how an exchange takes place, the relative power of each side – also matters: in and of itself, but also because this will impact or distort the outcome. It understands that how a company relates to its employees – whether it supports them in times of trouble, whether it invests in a long-term relationship with them, and whether it provides training and apprenticeships – will impact how loyal the employees are, how hard they work, levels of turnover and ultimately the performance of the company as a whole. Co-op capitalism values processes not just outcomes.

The network has worth

Whereas Gucci capitalism focuses on individuals – individual success and individual triumph – and does not explicitly value the network, co-op capitalism sees the worth in connections with one another. Connections often allow us to achieve things that we either could not achieve by ourselves, or could only achieve with great difficulty. Recognising that connections have both an economic and a social value means that enabling connectivity becomes of itself a social political and economic goal.

Collaboration can trump competition

For Gucci capitalists, competition is the only modus operandi. But co-op capitalism recognises there are times that collaboration is better. Take the practice of giving staff commissions on sales: when sales people are rewarded solely for their own contribution rather then the success of the entire organisation or group, ideas and information tend to be hoarded.

The 'why' and 'how' matter more than the 'who'

For Gucci capitalists, who owns the means of production is seen as key to determining outcomes. But co-op capitalism is more interested in why a particular set of goals are chosen (social purpose? profit? profit alone? long-term benefits? benefits for whom?) and how these goals are best achieved. Who achieves them, and the incentives they have are of course critical to determine, but co-op capitalism recognises that there are multiple configurations that deliver.

Co-op capitalism takes arguably the best part of capitalism – its Schumpeterian quality of evolution, innovation, and creative destruction – and marries that explicitly with collaboration, co-creation, pulling together in common cause and working with shared purpose.

And already we can see that this co-op model may well resonate much closer with our true natures than Gucci capitalism ever did.  The assumption of Gucci capitalism that we, as individuals are selfish, super-individualistic beings who only care about maximising our wealth, salaries and resources is not in fact an accurate depiction of mankind.

While it is true that over the past two decades there has been a perceptible pressure to keep up with the Jones’s, and a growing obsession with material worth, this may be more a case of nurture than nature. Anthropological studies show that societies that have less share more. Recent work in behavioural economics has confirmed that benevolence is not alien to human nature. In evolutionary biology we see that learning from others and sharing information with others is the key to human success. Recent findings in neuroscience also alert us to the fact that we are most contented when helping others. So while it may have been true that under Gucci capitalism there was a tendency to bowl alone, it is not the case that we are essentially individualistic.

In fact, much points to our predilection to do the opposite – to pull together– especially perhaps now in these difficult times, as we saw in similar difficult times in the past, such as the Great Depression and the Blitz.

While it is still early days to show a mass manifestation of co-op capitalism, there are a few things we can point to.

  • the meteoric rise of the global 'freecycle' movement, whose members give stuff away for free rather than sell their goods on eBay
  • the rise of sharing websites such as Zipcar, which allows people to share cars
  • the rise of couchsurfing.org, which helps people find someone who will put them up for the night abroad – 3 million people visited this site last year
  • the rise of collective purchasing co-ops in the US, where you can buy food, energy or phone services more cheaply
  • the rise in Japan of the notion of job-sharing: rather than sacking swathes of employees, employees are choosing to work less hours so as to soften the collective blow, a principle now being copied in parts of Europe

And for any sceptics who might argue that collaboration will never be able to deliver sufficient returns, let me lay out some facts.

In business the co-operative model in business clearly does work.  Italian co-operatives are some of the most successful businesses in Europe. The Desjardin’s Group, the financial co-operative in Quebec, is that region’s leading employer. In Switzerland, co-operatives are the largest private employer. In the UK, the co-operative sector has a turnover of £33.2 billion, with 12.8 million members.

And, importantly, in a time of crisis co-operatives seem to be able to endure and survive for longer than other companies. Indeed, while the financial and ensuing economic crisis has had negative impacts on the majority of enterprises, co-operative enterprises around the world are showing greater resilience. Financial co-operatives remain financially sound; consumer co-operatives are reporting increased turnover; worker co-operatives are seeing growth as people choose the co-operative form of enterprise to respond to new economic realities.

Meanwhile laissez-faire is significantly less in favour than it once was. In a recent survey conducted in the US, the environment traditionally the most hostile to government intervention, over half of those surveyed now say that the free market should not be allowed to function independently. Active industrial policy, so long off the political agenda, is now being discussed in Washington and London. In Italy, as across Europe, confidence in the free market has fallen by 50 per cent since 2008.

But ultimately transformative change will only come into effect if political leaders, but also those in business and civil society, take up the idea of co-op capitalism. This is a critical juncture – and potentially a dangerous one – because the stakes are so high and there’s all to fight for.

My hope is that our leaders have sufficient vision, and we the public have sufficient ambition, to turn the wreckage of the economic crisis into an opportunity to join forces to push for a more supervised, more equitable, economic system. Co-op capitalism would play by fair rules, have social justice and sustainability at its heart, and would reconnect the economy with what is right, just and meaningful. So I hope we all grab with both hands the opportunity to shop, not at Gucci, but at the Co-op.

This is an extract from Co-op Capitalism by Noreena Hertz, published by Co-operatives UK and free to download from http://www.uk.coop/coopcapitalism. Noreena Hertz will present Co-op Capitalism in a keynote speech at The Co-operative Opportunity in London on Wednesday, 15 February 2012.

 
 

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Noreena Hertz, Trustee and Growth and Prosperity panel