French lessons – how the social and solidarity economy was won

I had the opportunity recently to meet up with colleagues from the co-operative sector in France and to hear more about the success it has had in advancing a bold programme for a ‘social and solidarity economy’.

In France, 23,000 co-operative enterprises employ more than a million people (4.5% of the labour force) and have 24.4 million members. Co-ops are dominant in a number of sectors, including agriculture and food (40% market share), retail banking (60%) and retail distribution (30%). They are spread throughout the country – whereas nine out of ten large companies are headquartered around Paris, four out of five (76%) of the largest co-ops are headquartered outside in the regions.

The leading co-operatives include: Nicolas Feuillatte, the third ranked champagne brand, selling nine million bottles a year; Agrial, whose ‘Florette’ brand represent the leading European ready-to-use salad products; Intersport, the leading international distributor of sporting goods; Leclerc, the largest distribution business; and Le Relais Scop, the leading textile collection and recycling enterprise.

The roots of co-operation in the country  are sometimes dated back to systems of collaboration between farmers – fruitiere (ripening) – which were essentially cheese-making societies, that started in Switzerland and spread from the fourteenth century. These started with the reciprocal provision of milk between neighbours and developed into mutual societies. If you had contributed more milk than others, the next round of cheese was yours to sell – a dairy economy of sorts, although clumsy enough to lead to some disputes in the courts.

Almost a year ago, a law was passed with the support of the sector, but widening out to a broader social economy too, which is the Social and Solidarity Economy Act, passed on 31st July 2014. 

The legislation is broad in scope, involving one of the most comprehensive drafting processses ever seen in the National Assembly. Every committee, save that of national defence, were consulted in the preparation of the Act, as were eleven departments of government. The Act, 98 articles spread over 9 sections, champions social purpose and ownership across the economy. 

The Act represents a careful update of the previous co-operative legislation dating back to 1947, bringing the definition of a co-op into line with the Statement of Identity of the International Co-operative Alliance. Alongside this are new flexibilities in co-operative form. A new model, a residents coop, is introduced for people who want to buy where they live, to co-manage it and live together. The buyout of companies to worker co-ops is made a good deal easier – and demutualisation harder. 

While co-ops that have a wider community purpose have been able to serve non-members, it has been cumbersome to win the rights to do that, needing special provisions in statutes. The Act creates a blanket provision for co-ops to do business with non-member third parties for up to 20% of their turnover. 

One of the most significant changes though is a new responsibility, which is the extension of the practice of a ‘co-operative audit’, currently used a number of coop models (including worker coops, agricultural coops, housing coops and coops of the self-employed), to all co-operatives. This is a rigorous process, involving an independent external auditor. The same requirement doesn’t hold under the Act for wider social economy enterprises, which are only required to follow more flexible guidelines for best practice.

The audit marks a subtle point of balance, between informing members on the value of their coop and giving a tool for national regulators. At one point in drafts the Government was both proposing cumbersome procedures for the audit and inserting a right for it to withdraw co-operative status from poor performers. This met wit strong opposition and was withdrawn – as Caroline Naett, my counterpart at Coop FR, put it “co-operatives are not co-operatives by ministerial approval. They are co-operatives because they adhere to co-operative principles written into the law.”

The provisions for the sister parts of the social and solidarity economy, which include mutuals, foundations, voluntary organisations and social enterprise represent a combination of specific needs, such as a focus on volunteering rights, a strengthening of member democracy in mutuals, recognition in law of complementary currencies, and a generic framework, which should make it easier to move between different organisational forms – the assets of a coop when wound up can be transferred to any social economy organisation, for example, while an NGO can be converted into a community interest co-operative.

Of course, having an Act doesn’t mean that there is a full policy framework for the social and solidarity economy. There is an inter departmental public office that has been created, but without extensive resources and the risk is that action stops rather than starts with the passing of the Act. 

Even so, with Spain and Quebec also passing new legislation on the social economy, it could be that France has, again, started a revolution that could spread worldwide.

From conflict to co-operation – a few cartoons that are essential viewing

Conflict has been a feature of Britain’s largest consumer co-operative, The Co-operative Group, over the last eighteen months, as it has tried to turn round the business and build consensus on a new way of working.

We see conflict in all organisations, large and small. It happens for the same kinds of reasons – people have different views about what to do or how to do it, they are subject to different pressures, they suffer emotions such as jealousy, fear and anger and they compete to get their ideas accepted by those around them.

There are always reasons for conflict, sometimes good reasons. It is how you handle conflict that matters. In a co-operative, the organisation is ultimately a tool for people to come together, so sustaining mutual and respectful relationships is typically the place to start.

The Co-operative Group has been through tough times before in its long history and has typically emerged stronger and more agile as a result, but the key test is always whether challenge brings people together or pulls them apart.

Some years ago, working with a range of organisations focused on the food sector, including the Plunkett Foundation, Country Markets, FARMA, Sustain and the Soil Association, we developed a series of resources, authored by the respected co-operative developer Kate Whittle, on the theme of ‘from conflict to co-operation’. They have been in good use ever since.

Included are a series of cartoons that should perhaps be required reading for all those with strong views on the future of The Co-operative Group.

Drawn by Angela Martin, here is a selection of my favourites here below.

conflict1

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conflict13

conflict2

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conflict11

conflict5

In from the cold…the growing case for a new money system

Iceland suffered first from the crash of financial markets and is perhaps first to champion the cause of a new financial system.

A proposal commissioned by the Prime Minister of Iceland, authored by Frosti Sigurjonsson argues for a new system of money, created at source by the state rather than the banking system. The proposal credits in particular the landmark 2001 report by the New Economics FoundationA Monetary Reform for the Information Ageby James Robertson and Joseph Huber, for which I happened to write the foreword.

Monetary reform is a vital but complex cause, one whose advocates, however brilliant, tend to obscurity and which covers a range of sometimes competing proposals, including: reform of seigniorage, which is the issuing of money; the role of interest; the case for linking money systems with energy and resources; complementary currencies, digital currencies and co-operative systems of exchange, such as the Swiss WIR. One slide show which offers a quick tour of this is by Pat Conaty, Co-operatives UK Associate, up here.

Re-reading my foreword, I think it remains a reasonable introduction to the case for some such monetary reform.

“For all the prominence and sophistication of share dealing and financial services in the new economy, it is rare that we ask questions of our money system itself. The way that we issue and use money seems so ingrained that it’s hard to question. It is, in the words of George Orwell “the air we breathe”. Like air, it’s everywhere, we are dependent on it, and perhaps most important, until it is really dirty, it cannot be seen. We see the money system as something natural. But it’s not.

The rules of the money system have shifted. The majority of money that now changes hands does so electronically. As a result, far more than ever before, new money is not issued by the state but by banks. Ninety seven pounds in every one hundred circulating in the economy will now have been issued by banks (in the form of sight deposits, printed into customers’ accounts as interest-bearing debts). Only three pounds are cash, issued by the state (in the form of banknotes and coins, issued at no interest). The cost to the state of issuing new money is only the cost of producing banknotes and coins. The cost to the banks of issuing new money is virtually zero. The state receives public revenues from issuing cash, but banks make private profits. The benefits of the money system are therefore being captured by the financial services industry rather than shared democratically.

The loss of this privilege is equivalent to an extraordinary twelve pence on income tax in the UK. In effect it has become a subsidy to the private banking sector – a nice little earner, but one that should always have been for public benefit rather than private gain. This is likely to grow as as we move further still towards a cash-free economy, perhaps to a point where coins and notes represent less than 1% of money in circulation. Unless we find creative alternatives, the benefit of issuing new money will have transferred entirely from public benefit into private corporate gain. 

This report offers a practical and clear step-by-step agenda on the essential first step of restoring the right of issuing new money in a modern economy to be of benefit for the common good. In the terms of the new thinking that is emerging about the creation of sustainable and inclusive economies, this is an achievement that ranks high. It fits directly into a new theoretical model, combining socio- and ecological economics, in which market actors are located within common property resources rather than allowed to free-ride on the back of them. In short, the market meets the commons; and new economics, whether through eco-taxes or monetary reform, concerns the achievement of a fairer and more sustainable balance of cost, risk and return between the two.
This report addresses the issues and the complexities of how new money can be created. I encourage you to engage with it in full, because the analysis and prescriptions are landmark achievements and I am proud to be associated with it.

There is no better time for an idea such as monetary reform to flourish. The democratic state is being eroded in the face of global markets. In many parts of the world, concerns about market failure now have to be put alongside concerns about state failure. Issuing new money in the form of public expenditure enables the public purse to go further – whether for public transport, environment or regeneration. Restoring democratic control over how new money is issued is an important step towards a global economy in which unpayable debts are reduced and resources can be freed up for sustainable development.”

With Iceland looking at options for change, monetary reform at last is coming in from the cold.

The co-operative ideal is one of change

The ‘keep it coop’ campaign of the Co-operative Party has been high profile and energetic – and a testament to the skills of the small staff team and the politicians involved in the party. 

 

The campaign goes wider than simply trying to keep the funding for the Co-operative Party, which has long been aligned to Labour. But it is worth remembering that, despite one hundred years of action by the Co-operative Party, the original co-operative vision was not one that started from political alignment, but rather one of transformation from below.

 

These are four main dates that shape the formation of the co-operative principles around political activity:

 

1832: Twelve years before the formation of the first modern consumer co-operative in Rochdale, the  1832 Co-operative Congress, chaired by none other than Robert Owen, passed the following resolution: “Whereas, the Co-operative World contains persons of all religious sects and of all political parties, it is unanimously resolved – that Co-operators, as such, are not identified with any religious, irreligious, or political tenets whatever; neither those of Mr Owen, nor of any other individual”

 

1860: The Rochdale Pioneers declared in their Almanac: “the present co-operative movement does not intend to meddle with various religious or political differences which now exist in society, but by a common bond, namely that of self interest, to join together the means, the energies, and the talents of all for the common benefit of each”

 

1937: After long consideration, the International Co-operative Alliance published its first set of global principles, including the recognition of political and religious neutrality.

 

1963: The first revision of the principles was set in train. The agreement in 1966 included removing reference in the principles to neutrality and to cash trade. The rationale was, on one account, to replace political and religious ‘neutrality’ with political and religious ‘independence’, which is covered in a principle on autonomy. In 1992, a report for the International Co-operative Alliance explained that “this implies that co-operatives should carry out their own opinions without undue dependence on other organisations or on political parties” 

 

The Co-operative Party has a proud heritage and long list of achievements, which are set out in this elegant summary by the Co-operative Heritage Trust. It’s current manifesto offers a wealth of creative policy thinking. But there is, also, a different, and longer, tradition of political neutrality in the co-operative sector, both here and abroad. 

Some co-ops elsewhere have supported political representation, such as the effort by the Seikatsu Club in Japan to boost women’s representation in the 1990s, by putting up candidates under the banner of ‘politics from the kitchen’, but these examples tend to be the exception rather than the norm. Co-ops are often engaged in campaigns that might be seen as political, but it is rare that they seek direct representation in the way that has been the case here. Having said this, the autonomy and independence of co-ops from wider political sway has always been seen as essential.

There are two honourable traditions in the co-operative sector. Both share a common set of values, for example co-ops should act in an open way, but beyond these, you can choose to be politically aligned or choose not to be. Get it right, and either way can help to keep it all coop.

Prashant in Hong Kong, an economist on tour

My friend and former colleague, Prashant Vaze, is in Hong Kong and sends me an update on food and produce that he finds there. It is the take of a veteran environmental economist, never off guard.

” The Cantonese are major foodies. I mean this in the sense they really care about the food they eat. They scour the globe for the choicest foods: live crabs from Cornwall, rock lobsters from New Zealand, sea cucumbers and abalone (sea snails) from South Africa and the infamous shark fins from whoever will sell them.

Frozen seafood retails at a fraction of the price of fresh food so where possible these items are flown in, chilled but alive, at a carbon and financial cost and then presented in restaurants, supermarkets and wet markets. Customers either select the fish at the restaurant or bring their own. The chef despatches it, then serve it a few minutes later gutted, and stuffed with rice and spices.
Its not just fish. The Cantonese are proud of their reputation of eating absolutely anything. My colleagues delight in taking me to restaurants and serving me some harmless looking piece of meat and proudly identifying it afterwards as chicken’s feet, pig’s cheek, or squirrel’s testicle (I didn’t in fact know squirrel’s had testicles).
But just because Hong Kong people are into their food – it doesn’t mean the food is necessarily all that good. Or even edible for that matter. At least thirty per cent of Cantonese food is off-bounds to me either because it uses gross parts of animals (feet, snouts, intestines), inedible species (crickets, sea cucumbers) or endangered species. 
A friend from the environmental charity WWF told me that a street close to where I lived is one of the top spots for buying illegally traded ivory artefacts, cunningly labelled as mammoth ivory. It seems CITES, the international conservation agency, is relaxed about using species that are already extinct. Its disapproval is reserved for species on the brink of extinction. 

As an economist though, I do worry about the sort of behavioural signal this sends poachers.”

Cleveland – community economic development success story

Applications are now open for communities in England to participate in the new partnership programme on community economic development. In my last post, I listed five exemplars from the UK. I have been pointed to many others pretty quickly, but also asked if I can tell the story of Cleveland from the USA. So here we go…

The Evergreen Initiative in Cleveland, USA was launched in 2007 and was inspired by the successful Mondragon Co-operative Corporation in Spain that has regenerated the Basque country’s entire economy over the past 50 years by devising an ingenious co-operative economic development approach funded by a local co-operative bank within a worker owned enterprise network. The local co-operative bank began life as a credit union for worker co-ops and it has operated with a focused mission to recycle and re-circulate low-cost capital within the local economy networks established by the worker owned firms in Basque cities.

In an adapted design for Cleveland, low-cost capital has been seeded by grant capital from the Cleveland Development Foundation and supported by different forms of tax credits as well as long-term, low-interest loans from the federal government.

Evergreen Co-operatives have so far set up three expanding worker co-operatives: Evergreen Co-operative Laundry Services that has been supported by procurement from anchor institution hospitals and universities; Evergreen Energy Solutions that has been set up both for installing, owning and maintaining solar power on anchor institutional buildings and for repairing and insulating older housing stock citywide; and Green City Growers a food growing co-operative to create jobs through the largest inner city farm in the USA and green house facilities (with 3.25 acres under glass) designed to harvest three million heads of lettuce a year and grow several hundred thousand pounds of fresh basil and other herbs – on a ten acre site in a low income neighbourhood right in the heart of the city.

The strategy of Evergreen Co-operatives links up three co-operative economic development tools. Firstly the worker co-operative model to create good jobs including equity development for worker owners and profit sharing, secondly a Community Development Finance Institution owned by the Evergreen co-op network to invest and recycle low-cost capital (as subordinated debt at a rate of 1% to create jobs) and thirdly a Community Land Trust to develop the space and sites for food growing and for developing affordable housing in the second phase of their plan. They have raised already £200 million of low-cost capital for Evergreen Co-operative Development Fund, their CDFI, and the annual procurement power of their anchor institutions is $3 billion.

Cleveland shows the power of community economic development to change the future for a city. As David Boyle says in his report for us with the New Weather Institute, Ultra-Micro Economics, “small plus small plus small plus small equals big”.

The approach has stimulated similar plans to copy the ‘Cleveland model’ in other US cities including Atlanta, Pittsburgh, Milwaukee and Washington DC. Here in the UK, there has been work in Preston, as I mentioned in my last post, and there is nascent interest among co-operative councils and with co-operative development agencies, such as Hackney Co-operative Enterprise in East London, which aims to put its own housing-related services out to locally-owned enterprises, rather than source these from outside its target neighbourhood.

The first Community Economic Development programme for a generation, open soon…

While the elephants of national political life trumpet and dance, there is a wonderful new programme starting at the grass-roots level, with cross-party support.

This is the first national ‘community economic development’ programme for a generation – reaching back to the pioneering work on community business of the Highlands and Islands Enterprise Board in Scotland and on local economies by the Greater London Enterprise Board.

The new programme, which focuses on community-led solutions for economic renewal, is backed by the Department for Communities and Local Government and will be delivered by an alliance of organisations, including Co-operatives UK, New Economics Foundation, Locality, Community Development Finance Association and the Community Development Foundation.

Anyone who works on neighbourhood development knows that local economy shapes and defines what you can achieve. No jobs, you are playing catch-up. If the bank closes, businesses close as night follows day. No business, you will have no life on the streets, but the siren hoardings of payday lenders. Some of the most inspiring examples of neighbourhood renewal are those that have turned the local economy from vicious spiral to virtuous circle.

Local authorities have a key role to play, as the longstanding work of the Centre for Local Economic Strategies shows, but there is also something different about where this is true community-led regeneration. Success tends to be where you can tap into the same spirit of self-help and mutual aid that characterises the best co-operatives. Perhaps it is no surprise that over half of co-ops (56%) are to be found in the least advantaged areas of the UK, while the enabling role of community agencies, such as settlements and development trusts in the poorest neighbourhoods is well recognised. As Pat Conaty argues, in his book on community economic development, The Resilience Imperative, co-written with Canadian community economic development specialist Mike Lewis, they create a voice for local people and a stake in their success.

The new programme will help 50 communities in England to develop their own community economic development plans. Anyone can apply from April 1st – you just need to be involved in an existing organisation – whether that’s a local community group, local business, parish council or any other local body. An experienced adviser will act as the main point of contact and will guide you throughout the process of developing a well-supported, dynamic and deliverable local economic plan – with the support of a grant of £5,000 for the further development of your plan and with access to specialist support.

What does success look like? There are some great examples set out in the report we published last year with the New Weather Institute by David Boyle, called Ultra-Micro Economics in partnership with groups like Localise West Midlands, Sustrans UK and the Transition Network REconomy Project. When I was asked to select some of the best examples I knew of, to act as illustrations, this was my suggested ‘top 5’ community economic development success stories.

1. In West Dorset, rural communities have created local food links and new food enterprises.
2. In Haringey, money and jobs are being saved through a co-operative programme on energy efficiency.
3. In Preston, the local authority, police and health services are seeing where they can place contracts with locally owned businesses.
4. In Bristol, growing numbers of people have joined the local credit union, for local savings and a currency that can be cashed with local enterprise.
5. In the Black Country, a loan fund supports local businesses turned down by high street banks to survive and thrive.

There is plenty of scope now to add more!