What is the future of Europe? A co-operative contribution

The best way to move forward is to look ahead. That is the rationale for a consultation launched by the European Commission on the back of a recent White Paper on the Future of Europe.

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Co-operatives were involved at the start and at the heart of the European project. The Commission White Paper starts by saying that Europe was once the future, pointing to the inspiration of the Manifesto di Ventotene, co-written by Ernesto Rossi while he was held prisoner by fascist authorities in the Second World War.

 

Rossi was the founder and member of a co-operative, and its exchanges were core to his ideas.

 

So the Manifesto calls for a free and united Europe, as the Commission White Paper points out. But the Manifesto also goes far further by suggesting how that Europe should be organised – with “industrial reform which will extend workers’ ownership in non-nationalized sectors, through co-operative adventures, employee profit-sharing, and so on.” This Europe is still the future.

 

Co-ops are big business in Europe of today, with 141 million members and 4.7 million employees. But co-ops are not just business as usual. You will find in the co-operative sector enterprises that are utopian, in the best sense of ventures that challenge the status quo in search of new shores and new worlds.

 

It was European co-operative enterprises that were first to introduce an eight hour day in factories, the first to champion a minimum wage, the first to give business backing to the idea of national health and welfare services.

 

If we look at Europe today before looking forward, there are at least three challenges many would point to.

 

  1. The acute phase of the Eurozone crisis has passed, but the risks in terms of state and banking sector liabilities have not gone away and the legacy continues, with the ILO warning recently of worsening medium-term structural unemployment, even though short-term job numbers are on the rise.

 

  1. The enlargement of the European Union across Central and Eastern Europe is widely regarded as one of its greatest achievements. At the same time, it has changed the character of the union, including raising levels of intra-EU migration. At a public level, 47% of people say that enlargement has gone ‘too far’.

 

  1. Migration into Europe, coming out of the conflicts and political instability of the Middle East and North Africa, has also shaped public attitudes. Alongside acts of humanitarianism and openness have been fears and heightened concerns around security, not least with an illiberal drift in some countries of Central and Eastern Europe.

 

In its own way, each of these has an impact on the underlying values behind the idea of European unity.

 

Solidarity is a value that is set out as a core objective in the original Treaty of Rome, signed by the founding six countries. A quote from Robert Schuman adorns the Commission White Paper. In May 1950, he said that “Europe will not be made all at once, or according to a single plan. It will be built through concrete achievements which first create a de facto solidarity.”

 

Solidarity still exists. There is majority support at a public level for example for the idea that richer member states should financially support poorer ones (50% agreement, with only 18% disagreement).

 

Yet solidarity in Europe is also being eroded. Income inequality has increased in two thirds of EU countries. The Eurozone crisis created a divisive framing of creditor versus debtor countries. And Brexit, lest we forget.

 

The challenges of the future, including climate risk, automation, skills are ones which will require co-operation to resolve, and solidarity to do so in ways that sustain the dream of European unity.

 

Like a fractal, the echo of patterns from large to small, co-operative and mutual enterprises – the social economy of Europe – have an insight on these great issues, because we know what sustains voluntary and open co-operation in practice.

 

Solidarity itself, for example, is one of the six ‘co-operative values’ set out for co-operatives working across Europe. We know that solidarity is fostered and sustained in exactly the way that Schuman describes – through practical action in the name of a common cause.

 

So, in the spirit of Ernesto Rossi, working through Co-operatives Europe, we are looking to explore the future of Europe through the hopes and dreams of our members.

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We have a working group coming together and, to help their work and kick off the dialogue, here are five co-operatives across Europe that I have come across to kick-start our conversation. These are five that offer a radical economic alternative to a failing status quo:

 

  1. Democratic Technology
    Robin Hood Asset Management Co-operative out of Finland is a new form of financial investment and organizing. Robin Hood Co-op has been described as an “activist hedge fund”, but it is more than that. First, it is a co-operative, operating on the basis of one member, one vote. Second, it is both automated and decentralised, with assets placed in the stock exchange using an algorithm and tracked using blockchain technology. Thirdly, it is about reinvestment on the Robin Hood principle: part of the profit generated by the fund is invested into projects “building the commons.”

 

  1. Common resources
    The Cooperativa Integral Catalana in Spain has around 850 members that interact through a mutual credit network and a highly developed model of collective decision-making. One of the initiatives linked to this open co-operative is Faircoin, a complementary currency. One of the programmes of the co-operative is designed to move resources from private to common ownership.

 

  1. Socially useful money
    The Jord Arbete Kapital (“Land Labour Capital”) or JAK Bank in Sweden has been operating since 1965 on the basis of an entirely different model of banking, using interest free banking to serve its 35,000 members, particularly around housing and home improvements. JAK founders in Denmark inspired the development of the Swiss WiR (the ring) in 1934 that today operates as a co-operative bank providing interest-free finance though a mutual credit currency for about one in four small and medium businesses in Switzerland.

 

  1. Low carbon economy
    The German Sparkassen and Genossenschaftsbanken (co-operative banks), such as DZ Bank, with twelve thousand branches, are the leaders in using funds from the state development bank, Kreditanstalt für Wiederaufbau (KfW) for Germany’s carbon reduction programmes. KfW provides capital at 1% to DZ and other banks for on-lending. Since 2001 more than 2.5 million homes have been upgraded to high-energy savings standards.

 

  1. Integration
    Cooperativa Impresa Sociale Ruah is a social co-operative in Bergamo, Northern Italy. The co-op works with refugees, providing and working on housing, work, literacy, education, training and integration issues. In one year, according to the ILO, Italian social cooperatives like RUAH provided 18,000 refugees, asylum seekers and migrants with support and integration services, working out of 220 welcome centres.

 

To these five, many more could be added. Just remember, the only qualification to make, is that utopian ideas are about possibilities and not predictions for the future. The way to move forward is not just to look ahead, but to set steps, our direction, towards our chosen destination.

 

The reason why these co-operative possibilities are important is because as hard as alternatives may seem – whether tax reform, land reform, monetary reform or banking reform – the status quo is simply impossible.

 

In terms of climate change alone, the greenhouse gases that are forcing temperature rises stick around longer than we do. If we want to level off at no more than two degrees, then we have a choice.  We can grow the economy, or we can cut emissions and try and do so rapidly. It is increasingly clear that we can’t do both.

 

The big economic choices of our day are for an economy of prevention, a great transition to low carbon living within limits, or one of adaptation, a great disruption of coping, survival and loss.

 

We hide behind the idea that it might not happen; that resource efficiency means that we don’t have to choose; that the pace of technology development and innovation will save the day. But with resource efficiency, when people save money, they spend it elsewhere, typically redistributing rather than reducing carbon emissions. It is called the rebound effect. And technology? The futurist Ray Kurzweil reminds us that the pace of technology is accelerating far faster than we assume. We will see, he predicts, innovation over the next ninety years that are equivalent to the last ten thousand. But for now, though, when perhaps it matters most, the thrust of technology change underpins high carbon as much as low carbon economic activity.

 

The prevailing winds today are ones of intolerance, rather than of solidarity, ones of environmental hazard rather than of sustainability.

 

Imagination is the most powerful tool that we have for social change. By re-imagining the world around us, we can put it together again in a different way – first in our minds, then in our stories and ultimately in reality.

 

On September 13th, the European Commission President Jean-Claude Juncker will give his views in the annual State of the Union address.

 

Lets hope for some signs of co-operative imagination…

 

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The real challenge at Uber is not just leadership, but ownership

So, after a bizarre process of leaks since Sunday, Uber has confirmed Dara Khosrowshahi as the new chief executive.

New leadership at Uber gives the company the opportunity to change its ‘toxic culture’, but it is the underlying governance and ownership that needs reform. 

In the case of Barclays, Antony Jenkins, was hired as CEO to clean up the culture after record fines for misbehaviour. Within a short period, the Board’s priorities changed, he was moved on and new fines emerged for new misbehaviours. The lesson, as I have noted before, is that corporate executives change faster than corporate values.

In a company where ultimate control lies with the investors, when disputes arise or crisis comes, there is a need for owners to signal what values matter in how the business is run. In a digital platform such as Uber, the drivers are not owners, as they might be in a co-operative, but they also are key to the values of the business. Their participation shapes customer experience over time and the sustainability of the commercial offer.

The current governance structure of Uber, in line with other Silicon Valley start-ups, is flawed, not just because many investors are not true owners in terms of rights of control, but also because it gives no voice to the drivers that are ‘partners’ in name only.

The old saying is that business does not have a culture. It is a culture. A new CEO for Uber is a start, but the more radical decisions lie ahead. 

Co-operative capital that reaches forty million people worldwide

I have an uplifting set of figures land today from the ethical investment network, Oikocredit International, which operates out of offices in 31 countries worldwide. Here in the UK, we are proud to have Oikocredit as a co-operative member and support its work to attract individual and institutional investors.

The organisation now finances a €1 billion portfolio of enterprises in low-income countries with a development focus, including many formal co-operatives. Around forty million people, 84% of whom are women, participate in the ventures that Oikocredit helps to finance.

There is a healthy representation of fair-trade ventures in their lending, 85 over the year 2016, as well as a wider range of co-operatives, 2014 over the same period. Around half of the lending (48%) is rural, with just over a quarter (27%) focused on farming.

Oikocredit is one of a growing number of co-operatives and wider businesses that measure their performance against the United Nations Sustainable Development Goals. In line with this, the International Co-operative Alliance has been running a support programme to encourage the link – Co-ops for 2030, linking to the target date for the completion of the goals.

Sustainable Development Goals_E_Final sizesMany years ago, the pioneering sustainability author Hazel Henderson described work like this to me as ‘the arrival of global citizens, in advance of the structures of global governance’.

One answer to the challenges of international co-operation is to build co-operative institutions that can pave the way to a fairer world.

With forty million people in its reach, Oiokcredit and its investors, many of them faith-based, are making a start on that path.

The Moral Economy – review of a compelling new field of economics

It is common to contrast those who want to interpret the world and those who want to change it. Karl Marx had a formulation to that same effect. 

Modern economics can claim to do both. Economic interpretation is powerful because people so often accept its claims and act on its prescriptions. But what if the influence that economics typically has is simply to arrange matters so as to fit more closely its pre-ordained interpretation? 

There are plenty of examples of economic policy that assumes text book solutions and, for better or for worse, is pushed and pushed, despite reverses, until the reality comes closer to what the text book describes. 

When we use the word ‘market’, we use a metaphor for interpretation that is extraordinarily plastic. True markets, for the sale of produce in urban settlements, pre-date modern economists by thousands of years, but the reality of most markets today bear no relation to those original local markets, nor are they a good approximation of the economic text books.

So, what happens if pushing the text book model changes things for the worse? Well, then the text books would need to change for a start. This is part of the work of Professor Samuel Bowles who works at the Santa Fe Institute, leading a programme of work on behavioural sciences. With CORE (Curriculum Open-access Resources for Economics), an international collaboration of economists, he is currently developing a new curriculum for undergraduate economics.

Bowles is a brilliant thinker, whose work crosses boundaries across academic disciplines. His last book, A Co-operative Species: human reciprocity and its evolution, written with Herb Gintis, combined modelling, archaeology and evolution in order to re-tell the biggest story of all, the story of humanity. I reviewed the book on this blog some years ago. 

The subtitle of his latest book, The Moral Economy, summarises the argument of the chapters that follow, each based on a lecture he gave at Yale, in nine short words: why good incentives are no substitute for good citizens.

The idea that people respond to financial incentives is core to modern economics. By and large, if there is an opportunity to do so, economic policy argues that you should introduce financial incentives where there were none, and the outcomes will be better.

In the words of Paul Ekins and Manfred Max-Neef in their 1992 edited book Real-Life Economics, economics of this kind can be useful but that use is “limited by the extremity of many of its assumptions, about human behaviour, social structure and the nature of the biosphere.

In recent years, the profession has been active in qualifying those assumptions and exploring new tools for a new economics. When we respond, we don’t necessarily do so entirely rationally is the lesson from the field of behavioural economics. When we overshoot the critical carrying capacity of nature, scale rather than efficiency alone defines what will give better outcomes is the lesson from the field of ecological economics.

The field of experimental economics is one that has used the tool of game theory to understand how people are likely to behave in practice. What emerges from games such as the Ultimatum Game, tested around the world, is evidence that people will often act in ways that are co-operative rather than purely self-regarding. The reason is not down to incentives, but to values.

Sam Bowles is a pioneer in this field and the book tells the story of what happens if people are assumed to be self-interested, incentives driven. All too often, they become self-interested and incentives driven, because that is the signal they are given. That process works where markets work, for example where contracts are complete and there are no big spillover effects (externalities). But it can fail to work, and work to create damage, where this is not the case. 

Introducing financial incentives can ‘crowd out’ social norms. So for example, if you pay children to read books, they are less likely to sustain reading over time, when payments stop. If you pay them to draw pictures, the artwork is of lower quality. If you pay people to recycle, you can reduce the propensity of people to recycle without payment. 

The signal at work is that because there is payment, the behaviour of others is seen as instrumental and self interested. On the time-honoured principle of ‘I will if you will’ we are then less likely to act simply because we feel it is the right thing to do.

Bowles points to other examples of the same effect. Putting explicit conditions into a contract to cover breaches of the contract, for example, increases the likelihood of a breach.

Bowles cites the case of the Boston Fire Commissioner who was suspicious of firemen calling off sick and threatened to dock the pay of anyone off sick for more than fifteen days. The result was a spike in sickness, with a tenfold increase in firemen calling in sick on Christmas and New Years Day. The Commissioner in effect signalled that what he focused on was contract and enforcement. What was set aside was trust and values. Goodwill went out of the window.

The most celebrated case perhaps of payments ‘crowding out’ values was raised decades ago by the LSE Professor Richard Titmuss – the effect of paying for blood donations when it had been voluntary: the result in short was worse all round, higher costs, less blood collected.

The contemporary Titmuss Professor at the LSE, Julian LeGrand, reached a slightly different view. He had a go at modelling the effect of crowding out in his 2006 book Motivation, Agency, and Public Policy: Of Knights and Knaves, Pawns and Queens. His view in short was that if you could sustain payments at high enough of a level, then financial incentives could pay off through efficiency gains. As a result, he argued for the extension of policies such as competition between providers in education and health services. 

He did not at the time have access to the kind of behavioural models that Bowles sets out. And what he did not address directly was the potential downsides on social norms over time that might support children’s wellbeing or patients’ health. As ever, it is easy to assume that values are just fixed and unchangeable – like nature, always there, always to be drawn down. In reality, the right values can become over time as scarce as nature can be overstressed.

Rather than crowding out people’s values, is it possible to find ways to ‘crowd in’ those same values? Throughout his book, Bowles is interested in questions like this of governance… how should society be organised? Where can collective action make a positive difference?


An example is the effect of everyday institutions. Bowles cites public good experiments in Japan and Brazil which showed that those who contribute more are more likely to be members of fishing co-operatives. 

In part this is the influence of social norms, remembering both that people tend to align with how others around them behave, and that co-operation can breed co-operation. Markets are not necessarily bad for values. Honesty can be a key to a commercial moral syndrome, as Jane Jacobs argued. Business leaders in Costa Rica were more likely to be generous than economics students in the USA. That probably says more about Costa Rica though than it does about CEOs worldwide.

Bowles uses the example of presents to demonstrate the limits to markets and money. “Economists know that money is the perfect gift – it replaces the giver’s less well-informed choice of a present with the recipient’s own choice when she takes the money and buys the perfect gift for herself. But at holiday time, few economists give money to their friends, family or colleagues. We know that money cannot convey thoughtfulness, romantic interest, concern, whimsy or any of the other messages that gifts express.

The writers of the best-selling Freakonomics series are champions of the idea that incentives have a powerful effect across society. Their response to the kind of evidence that Bowles and others set out is to suggest that anything that motivates people beyond money can also be embraced as ‘non-financial incentives’. But this simply extends the metaphor – it doesn’t help us get closer to a more realistic account of human behaviour.

Bowles looks instead at identity and the influence this has on how we behave. “When people engage in trade, produce goods and services, save and invest, vote and advocate policies, they are attempting not only to get things but to be someone, both in their own eyes and in the eyes of others. Our motives in other words are constitutive as well as acquisitive.

He concludes with a series of points of advice for policy makers, each of which is a call for a more considered response than the idea that bringing activities into the market is the simple route to success. It is not, he jokes, a bumper sticker, but the message is that “social norms facilitate mutually beneficial economic interactions in those cases where contracts cannot cover everything that matters to parties to the exchange. Examples include the work ethic of the employee, the creativity of the software engineer, or the honesty of the borrower or asset manager.

The world is moving precisely in the direction of such ‘incomplete contracts’, as “the wealth of nations shifts from steel, grain and other goods readily subject to contract to producing and sharing intangible knowledge, caring for the young and the elderly, and the other forms of wealth characteristic of what is called the ‘weightless economy.’

If you simply want to change the world, without taking the trouble to interpret it, you are in the realm of guesswork and ideology. That is where conventional economics has been for some time, so caught up in its own measures of success that it has failed to question whether if the assumptions are wrong, the measures of success might be no less flawed. 

The good news for the interpreters, is that the world is more open to engaging on the basis of values than economics has led us to believe. Data from a wide range of behavioural experiments suggest that twice as many subjects exhibit co-operative choices (meaning that they returned favours even when not doing so would give them higher payoffs) as self-regarding choices. A moral economy doesn’t have to reinvent people’s values, but affirm them.

There is a compelling case to change the world… but to do so, we should also look at how we interpret the world, to understand what it is we need to conserve. 

That way lies the moral economy.

Freelancer co-operatives: how a financial hit became the best marketing money could buy

I am in Walthamstow for the launch of the latest outlet for the fast-growing freelancer co-operative, IndyCube, working with the support of the union Community.

3tyHPNW6The initiative has been brokered by the local Labour & Co-operative MP, Stella Creasy, who explains that “nearly 15% of residents in Walthamstow are now self employed, with many facing insecurity in their incomes as well as losing considerable time and money trying to stay afloat.”

With wonderful symbolism, the setting is a former Co-operative Bank on Hoe Street. Through the Hive programme, the Co-operative Bank as part of its ongoing Ethical Policy, has been directly supportive of a new generation of co-operatives, such as freelancer co-ops. We are likely to see local events or support from the Hive perhaps now delivered via this setting in East London.

The rise of freelancer co-operatives is being seen here in the UK – and we have a welcome new guide to the field due out this Autumn in partnership with the TUC and Co-operative College – but also in other countries.

In South Korea, after the Framework Act on Cooperatives took effect in December 2012, a swathe of new freelancer co-operatives have been formed. During the first 30 months after the FAC took effect, Koreans founded 7,132 cooperatives, of which more than 74 percent are small entrepreneur cooperatives, including cooperatives established by self-employed individuals with employees, self-employed individuals without employees, and freelancers.

Started as a mutual of artists, the emergence of SMART in a range of countries across Europe to serve freelancers is one of the poster children for an emerging new model.

Alex Bird, co-author of Not Alone, a landmark report for Co-operatives UK that helped to inspire IndyCube today, tells the story of SMART as a case study and there is one chapter which I found inspiring when I first heard about it. This was how the co-operative’s biggest single financial loss turned into its biggest marketing success.

Since 2001, SMART has guaranteed payment for all work invoiced through the system, underwritten by mutual funds built up within the organisation. So members are paid within seven days, and don’t have to worry about defaulters. This is not unusual in a wider business setting, in the form of factoring, but an inspired offer for freelancers. People who work as self-employed are extraordinarily varied (different tribes as the Royal Society of Arts puts it), but as Philip Ross, freelancer and Associate of Co-operatives UK, says, “one thing that unites everyone who is self-employed is that we all want to get paid.”

As part of their growth in Belgium and France, SMART recruited hundreds of “Take Eat Easy” cycle couriers. SMART were involved in negotiations with the company, and helped secure an agreement for their members to pay the couriers per shift, rather than per delivery.

In July 2016, disaster. “Take Eat Easy” went into bankruptcy – partly as a result of competition from Deliveroo.

Living up to its guarantee, SMART paid out to its members. The business lost the huge sum for it of €340,000. But it turned out to be the best recruitment tool that it had ever experienced. The members told everyone about the co-operative and how it had stood by them. Nothing else on the market matched this offer from SMART and freelancers flocked to join, for the assurance membership offered and having had the proof point of the collapse of “Take Eat Easy” that the co-operative was on their side.

Despite the shock and crisis, this was a good news story for SMART. It was a financial shock, but one that it was able to weather, having built adequate reserves in a guarantee fund over time. Every penny spent on the guarantee for cycle couriers who lost out was recouped in new membership fees over the period that followed.

Losing money turned out to be the biggest boost this enterprise could have.

Small is beautiful, but it is not secure. Small becomes powerful when it comes together.

 

 

Are you treated with dignity? New options in health and social care

Are you treated with dignity?

OK. Let’s try that again. When you are most vulnerable, most in need of care, are you treated with dignity?

It is shocking the numbers of people who are not – one in five patients in hospitals for example.

I have learned something of the value of dignity over the last ten years from the Finnish writer and philosopher, Pekka Himanen. He argues that dignity is an inherent part of the human condition. Working with young people, he finds that most people struggle with the question “Who am I?” and search for who they want to be.

So it is encouraging to read our new research on businesses that are trying to bring dignity into their care services.

Cartrefi Cymru was until recently one of a number of well-motivated but somewhat ‘top-down’ charities working in the field of social care.

The values of the charity always centred around the care user, but as with so many others, it was what they users did not have that prompted a charitable response rather than what they did. It was their needs rather than their dignity that set the agenda – their incapacity rather than their capacity.

Led by Adrian Roper, the agency has now converted into a charitable co-operative. The trustees saw that a co-operative model, which gives the people that rely on the organisation a say in how it is run, could restore dignity to a service starved not just of resources, but of empowerment.

coop_photo-300x225“It’s still early days, but the benefits of being a co-op already include better feedback about how we can improve what we do, a significant increase in activities which make our communities better for everyone – at no extra cost to anyone – and a host of new contributions from local suppliers and community members” says Adrian Roper.

With a turnover of £21 million and 1,250 employees Cartrefi Cymru Co-operative – the largest rural social care provider in Wales – is now a society accountable to the stakeholders that are involved with the service – its users, employees, and family supporters. The structure, which was developed with support from the Wales Co-operative Centre, offers a way to integrate the voice of these key partners into the organisation’s governance. Each needs to be treated with dignity.

There is more to health and social care, of course, not least the resources required for a service starved of funding. But talking about money without talking about voice and ownership will not tackle the dignity deficit.

To be treated with dignity is for those around you to respect who you are and the capabilities you have.

Ultimately, this is a question of power.

Do you treat people with dignity?

 

From shell to shelf – or how the snail farmers of Greece are responding to austerity

Now, I haven’t tried them myself, but still I’m wowed by the garden snails of Greece…

The Snail Farmers of Greece has been formed in recent years and is showing how one way to beat austerity is by doing it together. The coop organises the processing and packing of snails, long a part of the Mediterranean diet. Last month, it became the first business to offer full traceability from shell to shelf, along with compliance assurance on all European health and safety regulations.

For the lover of snails, the snails for eating are rich in nutrients and low in calories. The entire snail is used, whereas most commercial snails has its digestive system removed, so no one knows what it has eaten or where it has lived – the rest of the meat then becomes something of a shapeless mass, the snail remains packed together with others from a nameless region or country.

For the snails who are lovers, the farming is done with care, allowing for breeding with controls on time periods and climate conditions. 

This co-op is one of a number that is emerging in Greece, and it is a heartening story in the context of extraordinary economic stress: wine co-operatives; agro-tourism; a ‘superfoods’ co-operative formed in Karditsa processing and marketing four best selling berries – including the goji berry and blueberries.

The UK co-operative sector formed links with our Greek counterparts when austerity hit, funding work through Co-operatives UK and Cooperatives Europe to improve the legal and regulatory framework in the country. A UK code of governance for farmer co-ops, for example, has been translated into Greek and is used to support best practice. 

Today, bringing news of snails, wine and berries, I was able to welcome Lucas Mprecha from the Greek co-operative sector to Holyoake House in Manchester. Lucas is over for a month, working with the grocery co-op, Unicorn. In his bag, he brought two or three marmalades and ‘trachana’ from Muses Pierion, a first social co-operative, on the Italian model, formed by unemployed women in Katerina.

Snail co-ops remind me of an old Italian saying, quoted by George Jacob Holyoake in relation to the nineteenth century co-operative sector. That if you travel slowly, you can travel far – as long as you keep moving.

In a world of seemingly brutal competition, there is hope and vision in new acts of co-operation.