The 'John Lewis' State

Thu, 24 Feb 2011 16:54:00 +0000

Co-operatives Past, Present and Future

Dr Rory Ridley-Duff and Dr Anthony Bennett

Centre for Individual and Organisational Development (CIOD)

Sheffield Business School, at Sheffield Hallam University

(First published at www.roryridleyduff.com, 25 November 2010)

The announcement by Francis Maude that the “John Lewis state” is upon us has triggered a mixed reaction in co-operative, social enterprise and trade union circles. It was cautiously welcomed by Peter Holbrook, Chief Executive of the Social Enterprise Coalition, and roundly attacked by Tony Woodley, the Unite joint general secretary.

The policy is not new, however. During the last Labour administration, support was provided for 100 co-operative trust schools, local authority leisure facilities have been transferred to mutual societies, and employee ownership has grown in the NHS and care services. The coalition government’s new ‘right to provide’, therefore, accelerates the pace of change for a policy that is already established.

It is helpful, therefore, to review the history of mutuals and co-operatives. The Friendly Societies of the nineteenth century, based on a one-person, one-vote system of governance, provided social insurance to make good gaps left by the state and charities. The Liberal Party, from 1906-1914, introduced welfare reforms only after working people, through their Friendly Societies, had organised cover for the majority of workers. Nor were the Liberal Party’s motives entirely ‘pure’. The success of self-management based on workplace democracy suggested that an economic and social revolution similar to France in 1793, and brewing in Russia, might come to Britain. At a time when one-person, one-vote was being resisted in parliamentary elections, state intervention pulled the rug from organisations in which one-person, one-vote was working.

The political problem (for both the state and private interests) was that one-member, one-vote was effective. The same proved to be true in more conventional areas of commerce.

With the state now dominating welfare, the co-operative movement focussed on retailing and home building. In grocery stores, co-operative societies achieved a 54% market share between the wars (almost twice the share that Tesco has today). Building societies enabled people to build and own their own homes, using lending policies that are – by the standards of the 1990s – models of corporate social responsibility. The erosion of their dominant position is complex, but Conservative Party politicians did not help. In retailing, one minister in the Thatcher government announced on Desert Island Discs that his ‘proudest memory’ was smashing up co-operative stores that threatened private business interests. In financial services, the Conservative Party’s hostility to co-operative economics resulted in the demutualisation of building societies that paved the road to today’s banking crises.

And here lies the rub. The new coalition government is enthusiastic about co-operatives in the public sector, is advancing the Big Society concept in the third sector, but is painfully silent about ‘John Lewis’ values and principles in banking and the private sector. As a result, there is massive suspicion regarding their motives, and Tony Woodley’s memories of deregulated bus companies and demutualised building societies are fresh enough to justify his caution. Similarly, Peter Holbrook’s call for ‘asset-locks’ on public assets is informed by memories of carpet-baggers destroying the social capital that gave mutual societies their enduring strength.

One difference between now and the 1980s, however, is the growing knowledge about co-operative and social enterprise in the university sector. Sheffield Business School, where we lead MSc programmes, is not alone in building this capacity. Universities in Manchester, Oxford, Cambridge, East and Central London, Northampton, Bristol, Middlesex, Southampton, Liverpool, Leeds, York, Huddersfield, Lancaster and Durham, have all been building their research capacity or developing undergraduate and postgraduate curricula.

Tony Woodley’s hostility to mutuals is understandable on one level, but unfathomable on another. Many trade unions grew out of Friendly Societies, are themselves mutuals, are based on principles of voluntary association, one-person one-vote, economic solidarity and support for a social economy. They are uniquely well positioned to communicate with mass memberships, pursue a double-bottom line (economic and social) and protect low paid or vulnerable workers. Armed with new knowledge, they can play a leading role in establishing co-operative and social enterprises structured to protect the public interest under worker control.

Moreover, trade union involvement will mean less reliance on asset locks (favoured by the Social Enterprise Coalition). The failure of the Community Interest Company Regulator to prevent the break up of Ealing Community Transport (ECT) has raised substantive questions over whether an ‘asset lock’ is sufficiently robust to protect 'community interest'. The skills of trade unions in mobilising their members, however, creates a compelling case for them to work with social enterprise leaders to forge alliances and develop corporate arrangements that will grow and protect a social economy.

So, the next decade will be a defining period in history. The foundations of capitalism (that an economy should be based on private property for the purposes of capital accumulation) as well as those of communism (that an economy should comprise state property for the common good) are both being challenged by a new idea. The new vision is a mixed economy where social property is cooperatively managed and mutually owned, in which the state focuses on contracting worker controlled organisations to provide public goods. The biggest surprise – for those of us who have studied, taught, researched and managed such organisations throughout our working lives - is that this vision now has the support of all political parties. The intellectual space to grasp this opportunity may not last long, so the time to innovate is now, while heeding the lessons of the past.

Dr Rory Ridley-Duff is course leader for the MSc Co-operative and Social Enterprise Management course at Sheffield Business School, and the co-author of Understanding Social Enterprise: Theory and Practice available from Sage Publications.

Dr Anthony Bennett is a former TUC officer, who leads teaching on Employee Relations on the MSc Human Resource Management at Sheffield Business School. He is active as a researcher and has published papers on employee voice, equality and diversity.

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The 'John Lewis' State