Humanity at work

It has been a day full of values as I was taking part in the launch of a new research report in Westminster, which retells the extraordinary story of Mondragón and its network of co-operatives in the Basque country as a social innovation.

The event was in collaboration with the Young Foundation and Mondragón itself. The founder Father José María Arizmendiarrieta declared that justice can not be practiced where human dignity is ignored.

It was these values, of humanity at work, concluded the research team at the Young Foundation, led by ethnographer Dr Mary Hodgson, that underpinned an eco-system of innovation that is flourishing today – with 260 different companies and subsidiaries, with over 75,000 workers in 35 countries and annual revenues of 12 billion euros.

‘Social innovation’ as Mary characterised it, is best when it is ‘social in means and in ends’. She stressed that the ownership and democracy were essential ingredients in the continued success of Mondragón today as a social innovation.

The research demonstrates three key features:

  • the economic and social benefits of worker ownership and control along co-operative lines
  • the viability and value of co-operative entrepreneurship
  • the huge positive impact worker ownership can have on values and cultures, and mission, within commercial businesses

In addition, it shows how worker co-operation can result in Swedish levels of equality, without Swedish levels of taxation (the Gini coefficient in the Basque region is as low as Sweden’s, but the tax burden is at the EU average).

Mondragón operates with salary ratios, from top to bottom, of no more than one to nine. This was on the day when the Business Select Committee has declared, on rocketing CEO pay in British business, well into the one to hundreds, that “we do not have confidence that progress will be made without further pressure being exerted”. Sadly the honourable Select Committee members overlooked the idea that if we have different forms of business ownership, we might get different behaviours.

In the launch questions today, people asked about challenges that had come up – such as the closure of one business under the Fagor label and the threat of automation. In every case, the response of Mondragón was helping to turn those challenges into opportunities to develop and to compete, in line with its values (redeploying, for example, two thousand workers from the closing co-op in other co-operatives in the nexus). Mondragon has demonstrated, and intends to demonstrate further, how decent work can be secured even as competitive pressures and technology change looks to disrupt and destroy work.

What was their advice for us here? Ibon Zugasti Gorostidi was clear – “build up inter-co-operation between co-operatives, to help make them more competitive and more successful.”

That is likely to be one of the key themes in the coming National Co-operative Development Strategy that we have been working on with members, for launch later this year.

We have also worked with the Young Foundation to develop a national policy agenda for the UK, that learns from the experience of co-operation in the Basque country. This includes our proposal for a Co-operative Entrepreneurs Programme to help entrepreneurial people coming together to own and control their own livelihoods through co-operatives and social enterprises. And a Worker Buyout Fund designed to address the growing challenge of  business succession, not least as the option of foreign investment in domestic firms dries up in the context of Brexit.

Back to Father Arizmendiarrieta. Another of his sayings was that the idea is to institutionalize honesty. Better yet, he then went on to add, the idea is to institutionalize human greatness.


Dust to dust or… making wealth from waste

John Davis is a big man in my life. I am not sure he ever retired as such, but in his nineties he writes me letters from the South Coast of England with his plans and analysis – all in line with work he started with Fritz Schumacher, the author of Small is Beautiful, in the 1970s. 

John was Chair of the New Economics Foundation, and a wonderful guide, when I worked there in the 1990s.

John’s latest letter to me was prompted by the partnership and programme we have started on community economic development, working with support from the Department for Communities and Local Government.

“The aim and purpose of community economic development”, he writes “is to enable the populations of each local community to be as self-reliant as possible in the basic necessities of life.”

One way to start, he suggests, is to “make wealth from waste” in domestic energy by reducing its cost for all. The advantage of this is that it doesn’t require investment or a change of habits. “It simply requires central heating thermostats to be set at 12 degrees C instead of the higher, comfortable level, by having the higher level only in rooms when occupied using a top-up source heater.” He calls this ‘rational central heating use’.

Domestic energy is a major part of the nation’s total building energy consumption, accounting for 40% of inland UK energy consumption and CO2 emissions. To move towards zero emissions by 2050, to meet the overall 80% CO2 reductions needed, “there will need to be community energy service supply co-operatives that can ensure that every property is fully insulated, double glazed and operating rationally on natural gas or solar voltaic cells; and purchasing energy wholesale from suppliers to be shared between householders at lower annual costs because of the savings made.

In John’s area of Purbeck, for an average family in rented accommodation, 44% of their income goes on rent, in an area that has incomes 20% below the national average. “A self-build housing co-operative is needed to help make housing affordable”, by replacing high construction costs and speculative market prices for houses and flats with low cost technology and shared ownership of land.

To make wealth from waste in food, he recommends food delivery co-ops, to cut the waste of delivery systems for supermarkets, sourcing locally where possible. In transport, what is needed are co-operative car clubs, using reconditioned cars – making wealth from the waste of scrapped cars, which he estimated to be at the level of around 1,000 for a community of 60,000. Cars are the largest single item of waste people own that can be turned into wealth. His estimate is that up to 75% of the original sale value can be recovered through reconditioning – a process that is labour intensive so that the wealth is in part circulated through wages.

John recognises the need for these to go hand in hand with system changes – including for him, a dual currency system separating out the production and use of local essentials and national currencies for non-essentials. But what he explores is not a policy agenda but a mindset change, that what we thought was waste could turn out to be tomorrow’s wealth.

And conversely, that in a carbon constrained future with the imperative to meet basic needs for all, what is wealth today could be seen tomorrow, as no more than waste.

Dust to dust, ashes to ashes, we know that circle. Perhaps, in our generation or the next, we can create a new story and a new circle, from waste to wealth.

The next chapter for co-operative banking

The Co-operative Bank announced its results this week, with a further spread of red ink since its troubles began in May 2013. It is the right time perhaps to reflect on what next for ethics and co-operative banking.

For anyone who wants to know more about the state of the Bank, there is an investor presentation which tells the story. Put simply, the original plan was to trade out of the troubles back into full health. That has not been possible in current market conditions, despite plenty of hard work and practical achievements. The losses are exceptional – bad loans for example from the past that tend to go bad as they mature – and should be non-recurring costs. But the bank is not covering its operating costs in the current market conditions of interest rates lower for longer, even though those costs have come down, and that can never be a permanent state of affairs. And the bank has to operate with a sufficient capital cushion to satisfy the regulators, who, even if what happens to the bank is not classed as a systemic risk, will be watching like a hawk.

So, we are into Plan C now. The announcement last month of a search for a new buyer, or new capital, means that the next period will be one of flux for the bank.

‘What do I do as a customer?’, asked a friend yesterday evening (I think I encouraged her into the Bank in the first place many moons ago).

Of course, consumer protection in banking gives a guarantee of safety. Plus, the ethics are also strong and that remains a distinctive offer in a pretty despised banking market overall.

Of course, with values, no-one is perfect. You can choose whatever yardstick you like personally, or as a campaign group, to run the rule, but the Co-operative Bank is different. Its ethics are enshrined in the articles and the priorities are those chosen by the customers: that’s pretty much as democratic as you get.

The Bank is also engaging proactively with the rest of the co-operative sector, in particular supporting the cost effective but high impact programme of co-op business support, The Hive, run by Co-operatives UK. We have an agreed voluntary programme of compliance around the use of the word co-operative, in line with criteria that we drew up with the International Co-operative Alliance and in consultation with our members.

One option as a customer is to join the Customer Union formed by the Save our Bank campaign – or just link to it on Facebook. Customers who care what happens can then act together rather than individually.

The investor presentation by the Co-operative Bank CEO Liam Coleman makes it clear how critical it has been to the survival of the bank that it has remained and indeed strengthened its ethics (health warnings of course – nothing is perfect) and the customer base of around four million people has stayed loyal.

One day, that may be a Business School case study for ethical business, but for now that means that the ability of customers to come together and act together is critical for what happens next to the bank. Whether the suits in the Bank of England or potential buyers or investors appreciate that will be the flip side of this – this could yet turn from a survival epic into an unqualified tragedy.

And when we look at what is happening to co-operative banks worldwide, this is the story in every case. If you are owned by your customers, then your customers will tend to keep you on track, whether in terms of integrity or when things go wrong.

In Japan, the Norinchukin Bank made losses that were exposed during the 2008 banking crisis, having purchased worthless US securities at a time when the rating agencies were saying these were triple A secure. The bank turned to its members, who are farmers, to return it to solvency. The financial gap was around $900m, and the members made up the loss.

There are over four thousand co-operative banks in Europe.

A recent study led by the distinguished Professor Hans Groeneveld at the Tilburg University looked at sixteen co-operative banks across around a dozen countries in Europe and North America. The total membership is on the rise, with around sixty million consumer owners. Since 1996, the ratio of co-operative bank members to the population at large has risen from 14 to nearly 19, so that one in five adults in those countries are member owners of a co-operative bank.

Since 1997, their market share of deposits and loans has risen by around six percentage points to just below 25%. The cost-income ratio was comparable to the wider banking sector at large. Since 2008, return on equity has been higher than the wider sector (6.3% compared to 5.9%) – and I expect that is not an iron law but an indication that co-operative banks can perhaps behave differently in tough times, when they are needed the most.

There are regulatory threats and pressures – some moves to consolidation in countries like Denmark and Germany. Those pressures will be recognised by the wider UK mutual sector of building societies and credit unions – and the fledgling community finance sector too. It is great to see that Nationwide, full of confidence and purpose, has taken up membership of the European Association of Co-operative Banks. There will be a convention of European co-operative banks, large and small, in two weeks time.

The key point here is customer owned banking is a good and practical alternative to investor owned banks.

The UK Co-operative Bank is something of a hybrid, and was arguably never fully owned directly by its customers, but it has been a trailblazer on ethics for twenty five years and it matters a lot what happens to it next.

And however this does now play out, the next chapter of banking in the UK needs to be more mutual, more co-operative rather than less.

The best pub – a very different way to run a business 

It’s been another alcohol fuelled week. Not quantity, you understand, but quality…

On Wednesday night after an event of the Cross Party Group on Co-operatives at the Scottish Parliament, sponsored by Scotmid, I was given a masterclass on beer by a former member of the Edinburgh Student Housing Co-op, exploring the set up of a brewery co-operative. 

Last night came the wonderful news that our member, George and Dragon Pub in Hudswell, has been voted Pub of the Year by Camra. This was a public house rescued by the public. When the pub was closing, local people came together to buy and run it co-operatively. The confidence they gained acted as a flywheel for community development and new services for the village. 

The George and Dragon was one of the early and pioneering societies in our Community Shares programme, now operating in partnership with Locality, Power to Change, DTAS, Wales Cooperative Centre, Co-operative Development Scotland, Plunkett Foundation and others – raising member capital to get things going.

I was reminded in Edinburgh by Martin Meteyard of an earlier generation of social businesses, combining cooperation and alcohol: the ‘Goths’.

The story is that until the early 19th century every Swedish householder had the right to distil their own spirits – and many did. At the time the annual consumption of alcohol was quoted as 7.5 gallons per head! 

In 1855 a law was passed making domestic distillation illegal and licensing commercial providers. The city of Gothenburg decided to award the retail spirits licences to only one enterprise, run as a trust. The trust aimed to sustain pubs, restaurants and off licences but moderate excess drinking. 

By controlling the income the town treasury provided libraries, museums, parks and other community facilities. Although the sale of beer and wine were not included in these restrictions, the system proved extremely profitable, providing thousands of Kronor annually for Gothenburg.

After spreading through Sweden, temperance campaigners and public house reformers in Scotland promoted the idea of ‘Goths’. The system was applied in various ways in Scotland, although the movement gained its firmest hold in mining communities.

Several societies were set up to run public houses according to the Gothenburg system. Some were aided by coal companies. The ‘Goths’ of the mining communities of Kelty and Cowdenbeath in Fife, Newtongrange in Midlothian and East Whitburn in West Lothian are examples. 

Armadale Public House Society in West Lothian was begun in 1901 by raising funds through the sale of shares to members of the community and was run by a committee of men, typically local miners. 

It’s a simple idea – to make public houses public. But it is also a very different way to run a business.

Help is at hand – The Hive is here for all co-ops

The Hive is a business support programme for groups wanting to start or grow co-operative or community enterprises, run by Co-operatives UK in partnership with The Co-operative Bank. The Hive is helping to build better co-operative businesses across the UK by offering offer a unique mix of free online resources, business advice and training and an online community.

The Hive offers a range of bespoke business advice to new and existing co-operative businesses and community groups, including:
FREE ‘Is a co-op right for you?’ sessions for anyone interested in learning about co-ops

Direct one-to-one advice

Peer mentoring

If you want to start or grow a co-op, visit to see if The Hive can help you.

Capital for co-operatives

Money talks – and so do people.

The co-op model of business is one where the voices that matter are not those of distant investors, but members – the people who are up close and involved in the business. That makes a difference. But every business needs finance and capital, so how do co-ops cope with the trade-off between access to capital and ownership based on participation?

13-arnold-kuijpers-600x685The relationship, says Arnold Kuipers, Director of Rabobank in Europe, is ‘a tense one’. Arnold was the opening speaker at an outstanding roundtable that we organised this week in London, along with our sisters, Building Societies Association and Association for Financial Mutuals (which has just merged with the British Health Care Association, which is good news).

The experience of Rabobank itself ranges from member capital and guarantees at the outset to a point at which there was no need for external capital. More recently, it developed a model for member shares, as a minority of their capital base built on retained earnings – which, through the sweepstake of regulatory policy, is now sold to institutions outside.

The headline conclusion was that there is no avoiding the trade offs if you need capital. But there is a lot of room for manoeuvre in terms of designing the approach you take to avoid the risks, and in structuring your business around a true understanding of the full costs and opportunities of external capital.

We will be working with our members on models for member capital raising, building on the success story of the last decade around community shares. Pioneered, or rather renewed, by Co-operatives UK, working with Locality and with the support of the Department for Communities and Local Government, since 2009, around 400 community businesses have raised around £120 million in member capital. That is real social investment.

Arnold Kuiper’s presentation is here: arnolds-presentation-co-operatives-uk

Simon says …in a complex world, we need deeper democracy

One of the great UK thinker and architects of democracy systems, Simon Burall at Involve is making a change today and it is one that might affect us all.


Simon’s achievements at Involve have been numerous. They include his leadership and innovation on open government. Under his leadership Involve has championed the cause of open government as a worldwide movement. He oversaw the development of the UK Open Government Network, and ensured the UK’s Open Government Partnership process was established as a widely recognised model of good practice.

Simon’s tenure has also seen Involve lead the push for deliberative public engagement on complex and controversial science and technology innovations. Finally, Simon has played a critical role in the thought leadership provided by Involve. He has made the case for deliberation and engagement across a raft of policy areas, developed Involve’s theory on deliberative systems, and innovated new models of citizen engagement on public services.

As Chair of Involve (not the day job, I know) I am delighted that Simon will continue to work with Involve as Senior Associate. That gives him the space to work further around the concept of deeper democracy, including how society responds to complexity and the emerging challenges and opportunities of science, technology and data.

We have appointed Tim Hughes as Involve’s new Director. Tim’s vision, expertise and dedication to Involve’s cause make his the strongest possible pair of hands to guide Involve into its next phase.

As Tim writes today, “If Involve didn’t exist, now would be the time to invent it”. Overcoming the triple threat of disillusionment, polarisation and disconnection will be one of the defining challenges of the decade to come. With our skills and expertise in citizen participation, open government, deliberation and facilitation, we believe that Involve is uniquely placed to take a leading role in facing that challenge.

It is time to speak up on democracy and Involve has something precious to offer, which is a vision of a deeper democracy. John Dewey described democracy as conversation, and Simon’s tireless work in favour of a more deliberative democracy is a cause that is worth fighting for. Co-operatives talk about everyday democracy – and indeed are written into the Italian constitution on exactly that basis. In a more complex world, we need to upgrade our democratic systems and culture.

A lot depends on it. Thank you, Simon.