Self-defeating forms of co-operation.

The recent announcement by the Co-operative Bank in the UK, that in future it is to be dominated by the interests and investment strategy of a hedge-fund conglomerate, cannot entirely be a surprise. This bank has been dominated for decades by the investment approaches common to all banking and finance-capital enterprises. Like the wholesale side of the British co-operative movement before it, the Co-op Bank in had long ago almost totally surrendered to the capitalist mode of production. Its total capitulation came in 2009 when its oligarchic management, decided to ‘expand’ its influence by first purchasing Britannia Building Society and then in 2012, encouraged by the UK’s Con/Dem government ministers, Lloyds Banking Group.

This final speculative gamble that the purchase of Lloyds would enable a quick-fix for the banks previous self-created balance sheet weakness, was the final blow in its independence. Instead of gaining branches and staff it will instead now lose both. To save the bank from its own self-inflicted debt problems, the Co-op Group leaders are poised to cede control of the bank’s equity, to a group of Hedge-funds with the ruthless US ‘terminator’ Aurelius-fund leading the way. Thus the type of bank (a co-operative) which is supposed to be only responsible to its ‘members’ and customers, is now to become responsible to those finance-capital vultures which circle every country looking for victims to plunder. The rescue plan has granted these predators a 70% stake in the business in exchange for £1 billion to save it from bankruptcy.

According to the Financial Times Newspaper, one of the MPs who questioned the Co-operative Banks executives during a Treasury select committee, said the following;

“Isn’t it the truth that what was in vogue was the same irresponsible risk taking that (Fred) Goodwin (former head of RBS) and others did in other banks? You and your colleagues had exactly the same mentality.” (Financial Times. November 8.)

Indeed, they did have essentially the same mentality. It cannot have escaped our notice that essentially the same thing has happened to the many ‘mutual’ institutions such as building societies. Under their executives these have all previously gone the same ‘privatised’ way and are now owned by ‘shareholders and not members! All these non-private organisational forms were originally set up in opposition to the cut-throat and ruthless practices of the private sector product and service provisions that put profit first. For this reason, they were more often than not painstakingly set up by ordinary working people – who refused to put profit before product quality, good working conditions and above average pay. These organisations were intended to be radically different, than private capitalist ones.

Clearly the idea and practice of co-operation (and mutualism) is either a complete waste of time or the principles adopted by these particular types of mutualism and co-operation were at odds with what is really needed. If these ideas are to have a long-term benefit to those working people who first supported these alternatives to capitalism, any contradictions in them need to be removed. Indeed there was a debate – of sorts – over this exact problem in the 19th century. Back then ‘co-operative societies’ were seen by many working people and their supporters as a revolutionary alternative to the dominant capitalist mode of production. Some, such as Robert Owen (of New Lanark fame), even thought that well-managed co-operative projects would prevent the desire and need for a working class revolution. Of employees and members of successful co-operatives, Owen noted;

“They will therefore have every motive not to interfere with the honours and privileges of the existing higher orders, but to remain well satisfied with their own station in life.” (Robert Owen. ‘Report to the County of Lanark’ Part 3.)

For bourgeois ‘socialists’ and liberals co-operation was never meant to supersede the capitalist mode of production, but was seen as allowing a small degree of freedom from it for a select few. In contrast, many working people promoting co-operation saw it as a long-term solution to achieving decent wages, better conditions of employment, along with improved quality of food, clothing and other products for their consumption. And indeed for a short time – for many workers – it did exactly that. But under capitalism such partial and dubious forms of co-operation, despite such high hopes re-created all the problems introduced by the domination of the capitalist mode of production and almost all have abandoned the original form.

Marx on co-operation.

Marx had once been accused of being against co-operation. He was not. He was only critical of some of the forms this was taking. He noted in a 1851 letter to co-operators, that it had become the custom to cry down any individual whose vision was not identical to others. He went on to write that those who advocate a principle in a different way were too often ‘denounced as an enemy, instead of being recognised as a friend’ …. Interestingly, with regard to the 21st century ‘left’ that particular custom still prevails as many of us know from direct experience. On the contrary, wrote Marx in the same letter;

“I am its sincere, though humble advocate, and, from that very reason, feel bound to warn the people against what I conceive to be the suicidal tendency of our associative efforts as conducted now….I contend that co-operation as now developed must result in failure to the majority of those concerned, and that it is merely perpetuating the evils which it professes to remove.” (Letter to the advocates of the co-operative principle. Marx Collected Works Volume 3 page 573.)

We can see as was noted in the section above that the majority of such co-operative efforts have failed and have indeed during their life-times perpetuated most of the evils they were intended to remove . Marx based his criticism of the co-operative models then being followed under four general headings. 1. They were still based upon capital and the wages system (ie they continued wage-slavery). 2. Under the capitalist mode of production small co-operative capital cannot compete with accumulated private capital. 3. They perpetuated profiteering and competition with other workers (dividend sharing schemes). 4. While they last co-operatives often re-create an aristocracy of labour. In short they maintained, wage-labour, capital, profit and managerial hierarchy.

‘Why do the rich smile on it? Marx rhetorically asks in this letter. Because ‘they know in the long run it is harmless to them’, he replies. Under the capitalist mode of production, co-operation starting off small and energised by many enthusiastic and willing hands could initially succeed. In such small local forms it was (and is) largely ignored by capitalists, particularly big-capital. However, soon as they grow large they can be under-sold, boycotted and competitively undermined resources-wise by large private capital. This was the eventual fate of Robert Owens cotton mill in New Lanark and the heirs of the Rochdale Pioneers. Alternatively, they become hierarchical, speculatively corrupt and prey to the capitalist inspired Hedge-Fund’s as indicated by the case of the UK’s Co-operative Bank.

Marx, from his thorough understanding of the capitalist system, was able to warn co-operative movements that;

“Believe me! You are digging the grave of co-operation, while you think you are fashioning its cradle.”(Marx. ibid)

Capitalism is built on and exploits co-operation.

Any form of social life, requires co-operation, either voluntary or coerced. The means of production, whether in agriculture, industry or transport, require the integrated co-operation of large numbers of workers, as producers and consumers. So to do other areas of life, such as education, health, social services or communications. Co-operation was indispensable to ancient modes of production and it is essential to the modern capitalist ones. But of course the form of society created depends upon what form of co-operation and to what purpose. The capitalist mode of production requires the high-intensity ‘forced’ co-operation of the workplace in pursuit of profit for the few. That is its essential form and also its primary purpose.

Capitalist forms of co-operation are suicidal, for humanity and the planet. The capitalist mode of production by its pollution and intensity of exploitation is literally digging the graves of millions of workers and making grave-yards out of much of the planet. Because capitalist means of production are harnessed to the need to create profits decisions are made by the few in charge of these means. They decide on what to produce, how to produce it, and where to produce it. These decisions are all taken irrespective of the negative effects on workers conditions and pay and irrespective of any disastrous effects upon the climate or environment. And it is the generally enforced working practices, conditions and pay of the capitalist sector which undermine any form of alternative within the capitalist mode.

Co-operatives implementing above average wages, salaries and working conditions, will on balance have higher costs than any rival privatised outlets. These higher costs will in general create higher prices, for commodities and services. Poor pay and unemployment among the bulk of the employed population – a systemic characteristic under capitalism – mean this bulk (and many others) will choose to shop at the cheapest possible outlets. In this way even initially successful co-operative projects invariably stagnate or atrophy. In response to this capitalist induced inevitability, the often hierarchical organisational structures of co-operatives allow the management elite to make their own decisions in attempting to reverse this decline.

The process of managing a co-operatives decline and the vain hope of correcting it inevitably leads to programmes of cost cutting and speculative dealings, both of which sound the death knell for the better wages and any socially aware principles, they had in the first place. It is for these reasons than co-operation, whilst the capitalist mode of production continues to exist, is unlikely to succeed, beyond a certain point, before it starts to resemble any other capitalist enterprise. However, even under the capitalist mode of production that certain point can be extended. There was, and is, an alternative model. Although it was ignored, Marx suggested an alternative model which dispensed with share-holder dividend (profit distribution) and competitive expansion simply for market share.

Self-affirming forms of co-operation.

This further extract, from the above-noted letter to co-operators, is a lengthy one, but it is well worth taking the trouble to read, for it explains how many of the pit-falls of ill-considered co-operative projects can be overcome.

“A co-operative association is formed: after payment of its working charges (including labour in production or distribution), it finds itself at the end of the year with a surplus in hand; instead of dividing this surplus among the members, it employs it to purchase land or machinery, which it lets out to other bodies of working men, on the associative principle. The rent paid for the land or the machinery and the surplus of each concern beyond the working charges, is again to be applied to the further purchases of machinery and land, on the same terms and under the same conditions and so on, continually extending the power, strength and resources of the association. This is co-operation. It is co-operation, because it establishes a community of interest – the success of each ‘branch’ furthers the success of every other and of the whole collectively. There can be no conflicting interests – no rivalry – no competition – for the greater success of each undertaking, the more the stability and permanence of the whole is ensured. It makes the interest of each and all to see co-operative associations spread and multiply. This I repeat emphatically, this is real co-operation.” (Marx. Marx Engels. Collected Works. Pub Lawrence & Wishart. Volume 11 page 587/8, emphasis in the original.)

The full voluntary co-operation necessary to create an alternative mode of production to replace the present decadent profit-orientated one can only come after those who wish to prevent such a development are removed from positions of power. At that revolutionary juncture, positions of power will need to be removed from socio-economic forms of organisation and governance. Positions of power will need to be replaced by workers self-governance and international co-operation with other workers structured in such a way to balance well-being for the whole of humanity with ecological and environmental sustainability. In other words, the creation of an international community of interest.

In the meantime Marx’s proposal could be used by those who under 21s century austerity measures are faced with trying to keep open those necessary productive and welfare activities which are currently faced by closures and bankruptcies. Set up co-operatives by all means but ensure that their principles are not infected with bourgeois assumptions of elite control, competitive undermining of others and the exploitative use of surplus-labour. Co-operation is the way forward for humanity, but co-operation freed from the profit motive, freed from its elite hierarchies and freed from its local and national focus and bias. That is the aspiration and target for real co-operation.

Roy Ratcliffe (November 2013.)

This entry was posted in co-operation, Critique, Economics, Marx and tagged , , . Bookmark the permalink.


  1. Dominik says:

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  4. Sam says:

    I have a question, you are saying Marx advocated
    “A co-operative association is formed:…it finds itself at the end of the year with a surplus in hand; instead of dividing this surplus among the members, it employs it to purchase land or machinery”

    So when capitalists do that that’s called exploitation, but when coops do that that’s co-operation?
    Is he basically saying – take the surplus (which rightfully belongs to worker) away from worker and expand your conglomerate with it?! That is basically advocating robbing the worker in favor of coop coordinator class who then use the money at will to increase their power grab.

    • Hi Sam!

      Thanks for your query. I think perhaps the term ‘exploitation’ needs a clear definition before I discuss your query. I suggest in this context the following is the usual definition: ‘The utilisation of another person for selfish reasons’ . So when an owner of capital utilises the labour of another (a worker) to appropriate the surplus-labour/surplus value that worker creates we call this exploitation.

      However, when a worker produces something and also creates a surplus and decides to utilise it for some purpose he is merely doing exactly that. He or she cannot be sensibly considered to be exploiting him or herself – that would be a contradiction of the definition. He or she is not utilising another, nor are they necessarily being selfish. Likewise when a group of workers in a co-operative collectively decide to utilise the surplus value they create in the manner Marx suggests they are not exploiting themselves. Nor are they being selfish for they are creating the means for other workers to form co-operatives.

      I hope this helps to distinguish between the different uses of surplus production or surplus-value and the agencies of those uses. It is the agencies and appropriation of the surplus by others which determines whether people are being exploited , not the existence of the surplus.

      Every society must produce a surplus over and above the amount required to exist on a day to day or year by year basis. This surplus is necessary to replace worn machinery, tools, cover stoppages in production, provide for those who cannot work because of age or infirmity etc. Another part of the surplus is necessary to sustain those workers who only provide services to workers. Under the capitalist mode of production there is an additional extraction of surplus-value which goes to provide the capitalist class with their millions and billions and another to support vast armies.

      Under the capitalist mode of production, the workers who along with nature create all the wealth of societies do not have any say in how the surplus they create is apportioned so they are exploited. Under a post-capitalist economic system based upon revolutionary-humanist values, workers would not only control the means of production, but decide how much surplus to create and where it would be allocated. Exactly as they do in a co-operative. They may not do it in the way Marx suggested, but in my opinion it is likely to be similar.

      I hope this helps. See also the article ‘Productive and unproductive labour’ on this blog which goes into it a little further.



      • Sam says:

        Thanks Roy that makes sence!

        I always thought that capitalists made a big mistake when they allowed corporations to become “public”. I thought that workers would jump at the oportunity to purchas shares of companies they work for (may be small ones at first) and gain control. Then thy could fire all the managers and directors and reorganize along the lines of a coop.
        But i dont see workers doing it – why? I dont believe that there wouldnt’t be enough people to contribute money for this worthy cause out of solidarity.

      • Hi Sam!
        I guess there are a number of reasons why workers do not follow the path you suggest. First of all when capital requirement was relatively small, the workers had very little spare money. Seefor example Engels on the condition of the Working class in England.Only later during boom periods and after trade unions had helped wages rise the amount of capital required for large-scale production by that time was massive and far beyond the reach of ordinary workers. Even on the rare occasions when workers have bought out management and owners they are then in the position of competing with other capitalist concerns. Sooner or later they must depress their wages to the average or even below it in order to compete and so the advantage of ‘ownership’ under the capitalist mode of production disappears. This is why as I say in the article co-operation cannot last for long under the capitalist mode. The capitalist system needs to be overcome and the means of production taken away from private ownership and competition replaced by co-operation at all levels, local, national, internationaland global. Of course that won’t happen until the right conditions propel vast numbers of working people and their supporters into challenging and confronting the present mode of production. Meanwhile, the task for those who think in this way is to educate ourselves and evaluate past experiences so that when the many seek revolutionary ideas there are some available. See for example ‘Uprisings and Revolutions’ and ‘Marxists against Marx’. Regards, Roy

  5. Sam says:

    I think your analysis of competition under capitalism is incomplete.

    1. Capitalist enterprises compete in more than just cost.
    Reason being is because cost is not the only factor when consumer makes purchasing decision. Some of the other no less important factors are: novelty, quality, time to market, features. Consumers have proven time and again that they are willing to pay premium for each one of them. Think about it, if cost was really the only factor then why consumers are paying $400 for iPhone instead of buying a really cheap rotary phone, or getting an old free mobile phone.
    This factors force capitalist enterprises to compete with each other in these areas:
    A) cost i.e. keeping expenses low
    B) Quality of labor i.e. head hunting for top talent
    C) Labor force motivation i.e. making sure workers do their best
    D) Internal governance, structure i.e. agility of enterprise in reaction to market

    2. Coops are actually well poised to outcompete a capitalist enterprise in all key areas
    Your point that coops can’t compete in cost ignores the fact that coops have several key advantages

    A) coops don’t have a parasite capitalist on their back who takes all the profit for himself.
    That means coops are free to use that profit to either reduce the price of their product essentially outcompeting capitalist enterprises on price front. Or they can use that profit to improve wages and work environment. If they do that they attract a more talented/qualified workers thereby increasing their productivity and quality which again should outcompete any capitalist enterprise.
    B) In hunt for best talent, coops can offer higher pay due to not being robbed off surplus by capitalist and a more pleasant working environment due to peer to peer relationship and self-governance and luck of cut throat atmosphere common in capitalist enterprises
    C) Workforce motivation is also better at coop due to self ownership and solidarity
    D) Coops have superior internal governance structure due to free atmosphere and free flow of ideas from bottom up

    3. Beyond capitalism: coops – importance of competition

    Competition in cutting costs has negative consequence of downward pressure on wages, but it also has a positive aspect of
    A) improving efficiency
    B) fostering innovation/progress

    A) Inefficient enterprises rob humanity of resources that could otherwise be more productively used somewhere else.

    However enterprises compete not only in terms of cost but also ideas and innovation. Capitalism is bad, but in countries practicing it, it brought innovation explosion unmatched by any other. All because it creates fertile ground for competition in new ideas and innovation.

    Societies allowing competition in ideas and ease the way for their implementation will always do better than those that do not, and will always attract innovative, talented people. So coops need to be able to compete with one another to have a thriving society.

    Now with coops would you allow coops competing with each other in space of ideas and their implementations?
    If not, if you only want one coop to have full control over a set of products – then essentially you advocating monopoly. Monopoly always brings, inefficiency, bad quality, no recourse for unsatisfactory products, reduced innovation and ultimately stagnation

    • Hi Sam!
      Thanks for taking the time to comment. However,I cannot let the comment stand without drawing your attention and others to the following points.
      On your point 1. First of all I never claimed my analyses are complete – just contributions – so are you point scoring? Second I never claimed capitalist only compete on price – so again whats the point of this perjorative comment?
      On your point 2. I am aware of the advantages of co-ops but the article was dealing with the problems of co-ops under the capitalist mode of production. Again I would have thought this was obvious. This leads me to note that although using abstract logic, to me your analysis is fundamentally divorced from any contemporary reality. If the situation of co-ops were as simple as your seemingly logical exposition claims were are all the successful co-operatives? I respectfully suggest that if you wish to convince others of your prognosis then it would be necessary to produce a number of uncontroversial examples complete with facts and figures.
      On point 3 sadly to my mind your understanding of post-capitalism has clearly not got beyond bourgeois categories and assumptions since you retain wages and other allied bourgeois assumptions. Sadly this at the same time also demonstrates that you have not grasped that the future is not going to be determined by idealistic grand plans by me, you or anyone else for that matter. Not even by our suggestions and logical deductions. That too is an elitist bourgeois assumption or presumption. Exactly what workers under a future post-capitalist society will do when they control production will be up to them to decide in their own ways. All else is just abstract speculation. Regards, Roy

  6. Sam says:

    Sorry I mistook you for someone who wants to engage ideas on their merit, instead you seem to be only concerned with scoring rhetorical points.

    You have not provided rebuttal of any single of my clearly laid out arguments. Ironically you accuse me of being divorced from contemporary reality, meanwhile you are relying on over century old texts of Marx. Even more ironic you ask me for “facts and figures” while presenting none of your own – interesting double-standard. Finally you completely missed point #3 it had nothing to do with wages but with preserving fertile ground for competing ideas.

    • I am sorry too Sam. I thought we were discussing ideas on merit! You don’t seem to give any merit my article on co-operation nor my concern to value the contributions by Marx which is your right. I thought one of your previous comments merited a more pointed response -which I guess is my right. So we disagree on what constitutes merit! Nothing wrong with that of course but lets leave it there shall we? But anyway thanks for taking the trouble to communicate and best wishes. Regards, Roy

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