I was lucky enough to visit Rome last week with my Other Half and I was really struck by the influence the Romans have had on life in Britain. It’s Alcohol Awareness Week and I considered reviewing my 18 months of abstinence. Then again today is Wear Your Old Band T-shirt To Work Day …
But the story that’s dominating the headlines is the Co-op Bank scandal and I have some thoughts about that.
I should declare two interests. Firstly I’m the son of a Methodist minister and secondly I bank with the Co-op (as does South Leeds Life). I chose to bank with the Co-op because I approve of the mutual principle. That is, the business is owned by its customers.
The Co-op movement started life dealing in grocery staples such as flour. In Victorian cities flour was overpriced and was adulterated with all sorts of muck. The industrial workers were a captive market, their forefathers had farmed the land, but now they had no means of feeding themselves. It’s a bit like motorway services today – they are the only easily available source of fuel, coffee and sweets. The Co-ops grew up to guarantee quality and a fair price.
So what went wrong? I think it comes down to scale. Large organisations may work better financially, but I don’t think they are as efficient, involving or democratic as small ones. Take rates of sickness amongst workers of different organisations. Everyone knows that workers in the public sector have more days off sick than in the private sector, right? Well not really, because when you compare the public sector with private organisations of the same size there’s very little difference. It seems it’s not a matter of ownership, but of size.
Do you remember LICS? Leeds Industrial Co-operative Society. They had a big dairy on Geldard Road and their logo was all over town. They have merged with other local co-ops into one big organisation. The process has been going on for decades and it goes back to the roots of the organisation and that flour.
A private capitalist buys flour in bulk (wholesale) in order to split into portions and sell to individuals (retail). He or she is either rich enough to stump up for the bulk order in the first place or they borrow the money. They sell the flour at a higher cost than they bought it, covering their cost and creating a profit.
In the co-op model members come together and pool the money they were going to use to buy the capitalist’s flour and go and buy it in bulk. Over the years as the co-ops grew an organisation sprung up to organise it all, but that was the basic principle.
However, co-ops are not an alternative to the capitalist system, they work within it, ameliorating its worst excesses. The capitalist system has a relentless pressure for companies to grow and swallow up one another. In order to compete with the big companies, the Tescos and Barclays of this world, in order to maintain their buying power, the co-ops had to keep growing and so they merged.
I trusted the organisation that claims to be “good with money”. The Co-op Bank has an ethical policy that means it doesn’t invest in companies doing “bad things” in the world. Well that’s very difficult in this interconnected world, but at least not investing in the worst, most amoral companies. The Co-op doesn’t run an investment bank – the casino banking that almost brought the whole system crashing down in 2008.
They merged with/took over the Britannia Building Society where my mortgage was. I thought this was a good move to strengthen both organisations, but apparently not. I thought buying up the Lloyds TSB branches would allow more customers/members to benefit from banking with a mutual organisation. It turns out some bad decisions were being taken.
As members we’ve now lost control of our bank to some faceless “hedge funds”- another wing of the casino banking movement. Some people want to stay and fight for the ethical principles, but the mutualism was always more important to me. I’m going to see whether Leeds City Credit Union want to take over my overdraft.
I’ll be back next week with more of my views from South of the River. If you’re on Twitter, you can follow me: @BeestonJeremy.