Cooking the Books: Co-operatives Can’t Escape Capitalism

Those critics of capitalism who argue that the way-out is for workers to form co-operatives would have been shocked by the headline in the Times (23 October) ‘Stricken Co-op Bank falls into hands of American investors.’

Most people will associate co-operatives with the retail shops that compete against the supermarkets. Co-operatives have in fact a long association with attempts by workers to improve their lot under capitalism. The original co-operatives were set up to try to stop workers being ripped off by local shopkeepers. The Co-operative Bank was established in 1872 as a bank for these stores and later for trade unions and the Labour Party and their branches. There is even a Co-operative Party registered with the Electoral Commission but it is indistinguishable from the Labour Party.

Co-operatives were popular with radical workers in Marx’s day. Some (such as Proudhon and the anarchists) saw them as a way of eventually out-competing and replacing private capitalist enterprises. Others (such as Lassalle and the German Social Democrats) wanted them to be financed by loans from the state.

Marx was expressing some sympathy for the viewpoint of the German Social Democrats when he wrote in Volume III of Capital:

‘The credit system is not only the principal basis for the gradual transformation of capitalist private enterprises into capitalist stock companies, but equally offers the means for the gradual extension of co-operative enterprises on a more or less national scale. The capitalist stock companies, as much as the co-operative factories, should be considered as transitional forms from the capitalist mode of production to the associated one, with the only distinction that the antagonism is resolved negatively in the one and positively in the other’ (chapter 27).

He would presumably have envisaged this ‘gradual extension of co-operative enterprises’ taking place after the capture of political power by the working class at a time when socialism was not yet immediately possible, as earlier he had pointed to their limitations under capitalism:

‘The co-operative factories of the labourers themselves represent within the old form the first sprouts of the new, although they naturally reproduce, and must reproduce, everywhere in their actual organisation all the shortcomings of the prevailing system.’

The Co-operative Bank promoted itself as different from other banks by being ‘ethical.’ But, in seeking to expand its business, it took over a building society which had indulged in sub-prime mortgages and the like. This proved its undoing as it had to go to the stock market to raise more capital to cover the losses and got eaten alive by the vulture capitalists there.

The fate of the Co-operative Bank shows that cooperatives operate within the context of the capitalist economy and that if they are to survive they have to play by its rules, in particular to make a profit. And, again in response to market forces, most of this profit has to be reinvested in cost-saving machinery and methods of production. In other words, they cannot be used to improve the wages of those working for them or to benefit their customers by reducing prices. That would be the road to ruin.

Workers in cooperatives have in effect to organise their own exploitation for profit to be accumulated as more capital. They are not the way-out. As Marx pointed out, co-operatives ‘must reproduce everywhere in their actual organisation all the shortcomings of the prevailing system.’ And they do.