Coops and capital: keep the fire bucket at hand

I think this may be an appropriate moment to repeat a comment from George Jacob Holyoake, one of the pioneers of the British cooperative movement, which I admit I’ve quoted a number of times before.  Holyoake, who was making the Inaugural Address at the 1887 Co-operative Congress, said this: “The co-operator is not against capital. Capital is exactly like fire – an excellent servant when it warms the inmates, but a bad one when it burns down the house.”

Capital remains a knotty problem for cooperatives, and indeed it is one of the five issues identified as needing attention in the International Co-operative Alliance’s current strategic plan. The ICA has a high-level ‘Blue Ribbon’ commission investigating the topic, and the commission has now published a new report The Capital Conundrum for Co-operatives. It’s worth a read.

Here’s the start of the report’s preface, which very much echoes Holyoake’s 1887 comment: “Capital is necessary and desirable for co-operatives, because it enables us to conduct business, grow, and meet the demands of our key stakeholders. At the same time, unlike other enterprises, co-operatives’ Principles and structure exhibit a profound guardedness and unease about capital and its power.”

The new ICA report is a series of separate essays from across the cooperative movement (both sectorally and geographically). There are some interesting discussions of the appropriateness or otherwise of cooperatives accessing standard equity capital by establishing plcs which they part-own, a model which has been common recently for some agricultural coops and indeed in banking. The problem with this approach of course is that it creates a wedge which investors can use, so that what was once a cooperative business can quickly be lost to the movement. (Cue a reference here to recent developments at the UK’s Co-operative Bank).  I am pleased to note that the report includes some voices warning of the risks of this practice, the first time for many years I’ve seen this view prominently expressed in the coop world.

There’s an essay I particularly like from two authors working for The Co-operators insurers in Canada, and I will end this blog with a quote from their conclusion “The thesis of this article has been that co-operative capital is inherently incompatible with investor-owned capital, and that there is an abundance of co-operative capital available to support co operatives. The real issues, however, relate to the Co-operative Principle of Co-operation among Co operatives and how co-operatives may be empowered to access the co-operative capital that is available.”  There are, as they say, both ‘capital needy and capital rich’ cooperatives: there must be mechanisms in place to enable them to cooperate together and realise the capital resources which, collectively, are held within the movement.

The report is at ica.coop/en/media/news/new-report-capital-conundrum-co-operatives (Actually, the link wasn’t working today, but I’ve sent an email to the ICA to tell them, so hopefully it will be soon).

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