Capital for The Common Good

Capital for The Common Good

We know what the problem is.

Businesses owned by investors (PLCs) work well for those they are intended to benefit, namely investors. But they don’t necessarily operate for the common good.

We also know what is needed to create a better world: capital (which at present is mainly dedicated to the pursuit of profit) being put to a different, better and fairer purpose – something not limited to private, short-term gain, but rather the long-term benefit of all.

The point just made is, of course, a “capitalist” analysis of the problem; namely, one which sees our modern predicament from an economic perspective and regards the levers of trade and the financing of trade as the basis for a solution.

Of course, we need to engage with this contemporary economic perspective. But we should be careful not to let it limit our thinking. (“We cannot solve our problems with the same thinking we used when we created them”, Albert Einstein.) We can certainly broaden our thinking by adopting a longer-term historical perspective.

Those from a UK cooperative background might draw inspiration from an alternative approach to trading and the financing of trade – one which led to an explosion of capital growth, having started off as a pragmatic way of enabling desperately exploited people on the brink of starvation to get access to food at a fair price. Others with a European background might point to cooperative initiatives focused on generating jobs, or financial security.

Mutuality is a well-established self-help mechanism for communities to find alternative solutions. Where people are struggling against adversity, it is human nature to look for solutions with others. Solidarity creates opportunities not open to individuals. The risk of building relationships and trusting others is outweighed by the benefit of collective action; and the result of course is not just the discovery of a solution to the problem, but the emergence of something called “society”.

We can trace a direct line from the establishment of cooperative trading in 1844, the emergence of a cooperative economy alongside the rise of the trade union movement to the founding of the Labour Party, and the post-war settlement of 1948. Many would regard this point in history as a milestone in the evolution of the modern state, even if we might all have different views about what should have happened next.

The implementation of the 20th century grand vision of the welfare state was only possible because, over the previous hundred years, people had become accustomed to a way of living and inter-acting with each other through institutions which had had a deep cultural impact. Nineteen million people were members of friendly societies, there was a building society in most towns, and cooperative trading was on its way to the same market-share as Tesco. This affected people.

Between 1844 and 1948, the basic idea of mutuality became mainstream. A system that we all paid into, and which protected not just ourselves but also the most vulnerable, might seem almost idealistic today; but in 1948 it just seemed obvious, and it was introduced with wide popular support.

But that’s another story. Back to capital …

In 1844, twenty-eight people set about the challenging task of raising enough money to start a business which they would own and control as customers. Capital grew at prodigious rates and what started as £28 in an impoverished Northern English town led to a UK wide cooperative economy with capital of some £23 million at the turn of the twentieth century.

While “new money” was needed to start a society, the accumulation of capital was substantially due to trading surplus, left in societies as undrawn dividends. This money belonged to members who were comfortable that their money should be kept in their society and paying them interest, at a time before the wider availability of financial services.

As well as funding the growth of mainstream retail services for many on lower incomes, cooperative trading (and capital) funded education and training, housing, new local businesses, manufacturing, producing, processing and packaging, even some health and well-being services for members and employees. Cooperative capital was an engine for economic development. With hindsight, we might even call this “capital for the common good.”

Some might not have thought so at the time: we can see from the debates at the annual gatherings of the cooperative movement (Co-operative Congress) where, by the 1890s, there was great concern at what seemed to be an excess of capital, and much discussion about what to do with it. However, the visionaries whose bold ideas had led to the emergence of cooperative trading would have been less troubled. There is no doubt that Robert Owen, Dr. William King and the Rochdale Pioneers themselves were driven by a grand vision for a better society. Starting a shop was a crucial part of that; but looking at the objects of the Rochdale Equitable Pioneers Society (“Law First”), the real purpose was clearly much bigger. Pursuing a Co-operative Commonwealth was a search for the common good.

Human economic activity (buying and selling, working for reward, saving) is a fact of the modern world. That economic activity can be carried on for a broader public or community purpose, as cooperative trading and broader mutuality were partially successful at achieving; or it can be carried on for a private purpose, for the benefit of investors. History provides clear evidence that trade can be carried on for the common good; not just private profit. Yet people today struggle to imagine the possibility of anything other than today’s dominant approach.

If we would prefer capital to be dedicated to a different and kinder purpose, we need businesses dedicated to such a purpose, with ownership, governance, reporting and monitoring arrangements which support and promote such a purpose, and capital which we want to commit to that purpose; my capital and yours (retirement and other savings), and the collective and indivisible benefits of cooperative trading for the benefit of future generations.

This is neither beyond imagination, nor beyond possibility. It is important to address the technical questions around the modernisation of financial instruments, constitutions and statutes to move the agenda forwards; but let’s not narrow the debate to something about legal and accounting technicalities.

The real question is whether we want and can imagine a different world.

This is a guest blog from Cliff Mills. Cliff works as a consultant on the cooperative idea and movement with and for Anthony Collins Solicitors in Birmingham. He was a speaker at the Cooperative’s Ways Forward Conference last week in Manchester where he delivered these ideas. We hope to get into some of these ideas and this thinking at the festival this summer.