It’s all (gone wrong) at the Co-op

In 2014, I proposed a long-form piece on the crisis affecting the UK’s Co-operative Group for a review journal; they eventually passed on the piece after it was written, but it was too much work to leave lying around….

After attending the Jubilee Congress of the Co-operative Women’s Guild in 1933 Virginia Woolf wrote in her diary that ‘they say things which aren’t true: that we are on the brink of a new world, they talk of the triumph of co-operation’.

A capacity for unfounded optimism is common to all movements for whom a promised land must always be within grasp if not reach, but the British consumer co-operative movement has consistently overstated the imminence of its victory.

The Canadian scholar of the co-operative movement Iain McIntosh once made a study of co-operative movement literature — annual reports, Chairman’s addresses to members and the like — at the turn of every decade in the 20th Century, and found a curious consistency: whatever decade he looked at, leaders had a similar message — things were always worse than they were 10 years earlier, which meant now, more than ever before, conditions were perfect for co-operation to sweep all before it and come to the rescue of humanity.

So it was in 2008 when the start of the great recession led to an upsurge of interest in co-operatives and mutuals. Member-owned financial enterprises were spoken of as a crucial part of the road back to an economy not grounded on speculative financial services and where Building Societies would perform their longstanding and boring function of providing money for people to buy homes to live in rather than speculatively boost housing bubbles. Customer-owned businesses wouldn’t be incentivised to screw the punters on behalf of the shareholders, selling honest produce at a fair price to producer and consumer, and growth would be organic and sustainable, rather than speculative.

The Co-operative Group — then the world’s largest consumer co-operative, with over 4,400 retail stores, funeral parlours and pharmacies, as well as the Co-operative Bank — was keen to ride the wave, viewing its renaissance as a harbinger of a better economy. After a period in the doldrums, it was going through a period of sustained growth and expansion that had seen it acquire Somerfield to become the UK’s fifth biggest supermarket, whilst the acquisition of Britannia Building Society and the imminent takeover of 632 branches from Lloyds was looked upon favourably by politicians and commentators as creating the ethical challenger bank needed by the consumer and the economy alike.

The Group’s 150th birthday in 2013 was celebrated with a confident triumphalism: a feature film dramatising the founding of the modern retail co-operative movement in Rochdale was commissioned, whilst a graphic novel spoke to the endurance of co-operative ideals through the ages, projecting them into the future with a Mars landing made possible thanks to the power of co-operation. A new office building was constructed across the road from its Manchester headquarters, outside the footprint of the estate of the ‘old’ co-operative institutions near Victoria Station. The future was bright: the future was co-operative.

The party mood took a dramatic downturn with revelations that the organisation was in fact teetering on the precipice of bankruptcy. The plan to take on the Lloyds branches was suddenly abandoned, closely followed by the announcement of £1.5bn losses in the Co-op Bank. The Britannia’s corporate loan book had gone very bad indeed, causing a £1.7bn impairment (where the loan is treated in accounting terms as if it will default) with just twelve loans responsible for £900m of that, reportedly in commercial and retail developments in the north of England. The Bank turned out to have been up to its neck in PPI mis-selling and was on the hook for just under £500m in compensation; small beer in the context of the £13 billion UK banks are to repay to customers, but around £500m more than one would expect from the bank that pioneered ethical banking in the 1990s. And the Bank was as bad with its own money as other people’s, as a series of bungled IT infrastructure decisions left it having to writedown £500m on a new banking platform that was never developed. The Bank’s bonds were downgraded to junk status and were snapped up by investors who specialise in buying debts on a massive scale at knock-down prices and screwing the companies for every penny; the challenger bank for the post-crash world was now owned by Vulture Funds.

It amounted to a perfect storm for the group that now faced insolvency as the costs of recapitalising the Bank combined with declining sales in the ultra-competitive food market to give it losses of £2.5bn in 2013. With the Bank’s reputation for ethical and financial probity in tatters as far as financial observers were concerned, it was shredded in the eyes of the general public when the Bank’s chairman until the middle of the crisis, the Reverend Paul Flowers, was revealed to have an irreligiously prodigious habit in class A drugs and rough trade. A series of exposes combining religion, politics, gay sex, drugs and banking lacked only a minor royal or an X-Factor contestant for a Sunday tabloid scandal full house. When it came to bad news, it was all at the co-op, in one of the greatest examples of corporate hubris in modern times.

The story of the co-op begins with those Rochdale Pioneers who opened the first successful co-operative store in 1844. Rochdale was a hotbed of political radicalism but in the middle of the ‘hungry forties’ it was also a place of appalling squalor and exploitation. This gave the Pioneers’ equitable society a dual role that remains with the co-operative movement to this day — tough on want, tough on the causes of want. They had grand visions for the Co-operative Commonwealth, which would usher in an economy based on human dignity and need rather than capitalist exploitation and profit, but they started their journey with practical steps: a shop that might sell unadulterated goods at fair prices, in which surpluses were not to be pocketed by owners as profits but redistributed to those whose custom had generated them in proportion to their custom: the divi.

Everyone of a certain generation in the UK can remember their parents’ divi number. It was learned by rote by children sent to get the family groceries from the local co-op so that the purchases would count towards the share of the profits. But behind such a humdrum notion was in fact the movement’s killer app or secret sauce, responsible for the astonishing spread of the movement beyond Rochdale to the UK and beyond.

The Rochdale group did not invent the notion of a dividend related to purchasing in a co-operative, but their key insight was to use it systematise the mutual self-help that is at the heart of co-operation in a way that made sense to members and facilitated growth. Dividends were paid quarterly, and so worked like savings banks to their overwhelmingly working class members, whilst the surpluses were also reinvested to allow for growth, societies were able to open new branches and develop their own farms and factories to produce the goods they sold.

It was famously likened to an octopus spreading its tentacles into every facet of economic and cultural life, which was true: co-operative societies would provide solutions to a range of problems their overwhelmingly working class members were beset by. In addition to your groceries and your funerals and medications, you could live in co-op housing estates, play sport in co-op clubs (one such club introduced the young Fred Perry to table tennis and, from there, to lawn tennis), watch films in co-op cinemas and borrow books from the co-op library. It really was all at the co-op.

In 1863, the societies then in operation banded together to form the Co-operative Wholesale Society (the CWS), which the Co-operative Group views as its own date of foundation. It was a federation to manufacture and import in greater quantities, in which individual societies invested their capital collectively to enable the growth of the organisation into ever more diverse areas of manufacture and by the century’s end it was the world largest tea importer, had factories, mills and farms across the UK and beyond, offices in the world’s great trading ports and its own fleet of ships. All of this was built by entrepreneurs whose achievements dwarf that of the better-celebrated Sainsbury’s and Selfridges, and without a penny of outside investment, but from the retained surpluses from millions of members and billions of transactions.

Dividends aren’t exclusive to co-operatives, of course, and anyone with shares in a private company will get them in proportion to their share of the company’s profits. Where they differ is that in a co-operative you can’t sell that equity onto someone else and, no matter the value of your stake, you get the same single vote as any other member (the decision-making in a co-operative has far more in common with a country than a company, where all citizens have a vote regardless of their tax contribution or their income, so in that sense, talking of ‘UK plc’ is a fantasy rather an apt metaphor; ‘UK co-operative’ is a much better description) and that’s not an accident, given the founders’ roots in Chartism and the fact that members — including women — got the vote in their societies decades before they achieved it in society.

A standard capitalist company makes money for its shareholders through profits generated from trade with its customers, but in a consumer co-operative, these two groups are the same (or at least were at the start) so making the shareholders richer by making customers poorer doesn’t work. The co-operative exists to serve members rather than enrich them, so the economic and social benefits that members receive are in a dialogue with each other.

Co-operatives are, and have always been, both political and economic communities, with decisions seemingly made about one turning into discussions of the other, like the surface of a Möbius strip. How much should worker co-operators get paid to ensure a decent living versus not pricing themselves out of the market; using fairly-traded produce wherever possible, even though that might raise prices in stores, or, a current issue being pushed by some members of the Co-operative Group, ceasing to advertising in the Sun while it still has Page 3.

Who a co-op’s members are and what benefit they derive is, then, at the heart of every co-operative. Consumer co-operatives are the dominant form in the UK, whilst worker and housing co-operatives have a much larger presence elsewhere. Consortium co-operatives like Associated Press, Visa Europe, Best Western Hotels, Danish Bacon, Arla Diaries or Ocean Spray are owned by smaller entities which band together to achieve economies of scale and eliminate the unnecessary costs of competition and replication; they rarely make much of their co-operative nature, which is why you’ll likely now be musing on the fact that many of the world’s largest banks provide customers with credit cards through a co-op.

Community co-operatives are a new and growing variant of consumer co-operatives, for whom the enterprise and its operations are central to a community of interest, such as a community-owned shop or pub, and where whilst some of the owners might not be customers, they have a non-pecuniary interest in its success. Hybrid or multi-stakeholder co-operatives blend different classes of members reconciling potentially competing interests through a variety of constitutional mechanisms.

All of the above can be either common ownership variants, in which the members in the here and now do not have the right to personally profit from the assets that have been laid down by previous generations, or full co-operatives, in which the control of the enterprise includes the right to sell it up and take a cut (as happened with Building Society demutualisation in the 1990s). All are united by supposedly upholding the seven ‘Rochdale Principles’ agreed by the International Co-operative Alliance. These principles have evolved since 1844 (‘no credit’ could not survive the post-war boom in consumer credit) but remain the way the movement defines what is and isn’t co-operation across the different economic and cultural circumstances which call forth co-operatives. They have been described as ‘an organisational toolkit and a manifesto’, reflecting the prosaic utopianism that defines the co-operative ideology.

The dominance of consumer co-operatives in the UK is partly an accident of history and partly by design. As socialists, many of the founders were attracted to the notion of worker ownership of factories in which surplus value would be a thing of the past and so, alongside some early trade unions, they invested in employee-owned factories. They had the misfortune to do this in the middle of tough economic times and usually failed (taking members’ money with them) and, if they did succeed, the managers invariably saw an opportunity to take ownership and control (and thus profits) away from the workers. Commissioned by the co-operative movement to examine the case for workers’ control, Beatrice Potter (later Webb) was unequivocal that the way in which both the co-operative movement and the goals of a fairer society were best served was through consumers, rather than workers, owning smaller societies which then combined to jointly own the factors of production. Webb was also sceptical about whether workers had either the intellectual ability to run enterprises or the discipline to not trouser all available profits, an attitude that is still heard to this day, despite all evidence to the contrary.

The disdain for worker co-operation in the UK from both consumer co-operatives and trade unions continues, and is isn’t just because of the failures in the 19th century but due to fundamental ideological faultlines: the UK’s worker co-operatives are products of a 60s counterculture with far more sympathy with anarchist and autonomist traditions than the democratic centralism that underpins representative democracy in the Labour, trade union and consumer co-operative family. They are overwhelmingly smaller, flatter, consensus-driven organisations, based on a commitment to openness and transparency and have a deep suspicion that representative governance is a staging post to management capture, whilst trade unions have struggled to make a role for themselves in workplaces built on collective empowerment of worker rather than management fiat and shareholder value. Worker co-operatives (and housing co-operatives too) have always been more mindful of a question the consumer co-operatives long ago decided not to care so much about, and which eventually came back to haunt the co-operative Group in 2013: just how big is big enough, which itself is a subsidiary to the even more critical question of just who are we doing this for anyway and why?

A thread that runs through the history of British consumer co-operatives is the question of co-ordination. Locally owned co-ops jealously guarded the right to control their destinies and believed long-term contractual relationships ran counter to that local democratic control. Even after the creation of the CWS, some societies, especially the big city ones with large branch networks, retained their own factories producing their own goods and eschewed the CWS’s goods. Those same societies would also buy goods from non-CWS sources if the price was right, and so the CWS never knew how much of any given good its member co-ops would actually take from them, which created havoc with setting production targets, and how much and when they’d be paid. Beneath the rhetoric of fraternal co-operation lay a fragmented and fractured landscape in which pieties often took the place of genuine principle. Whilst the co-ops collectively remained strong despite this, they entered the post-war era in a weakened state and their inability to co-ordinate, always a concern, began to be seen as the core problem.

The larger rival multiples — Tesco and Sainsbury’s, plus a few others no longer with us, such as Victor Value — were able to use their ability to raise capital from outside investors to respond to the growing trend for supermarkets on the edge of towns. Some co-ops were able to respond but across the movement capital reserves were not what they had been. The 1933 Budget saw the long-held dream of the co-op movement’s rivals realised with co-op societies’ reserves (aka unpaid dividends) treated as taxable, and so many societies began paying much higher dividends to prevent those reserves being taxed. Members thus became accustomed to them and voted for Directors committed to maintaining them.

That new scale of the privately-owned multiples enabled them to drive down prices after the abolition of the retail price mechanism in 1961. The local societies resisted forming a buying group of their own to get similar discounts because, ever alive to their own status, they feared that if the CWS became a fully-fledged buying group they would become its servants rather than it being theirs. To cap things off, the CWS’s own products couldn’t be advertised by CWS themselves, only by the retailing co-ops, meaning they started to fall behind the brands advertised on TV and elsewhere. The co-op started to look staid and behind the times, and even where it did innovate — self-service stores were a co-op speciality until the multiples caught up in the 1960s — the rollout was haphazard, with different co-ops taking a different view of whether it was worth the bother.

However much any individual co-op society tried to look like the shop of the future, it could never do so while held back by the byzantine structure of the CWS and the Co-operative Union, the umbrella body of the movement. On pretty much any issue, by the time the whole movement was ready to move, it was usually many years after it first began piloting this or that innovation, by which point its rivals had often taken the innovation on board and implemented it across their stores (Tesco’s Terry Leahy was trained as a co-op retail executive, and the concept of the Club Card providing rewards was a mixture of the old idea of the divi combined with the kind of technology co-ops couldn’t yet deploy). Against a backdrop of falling sales, managers and boards tussled over the core strategy. Directors elected by active members favoured dividends in face of price cuts, whilst managers argued that without higher sales, there could be no dividends, and so prices must fall, and damn the reduction in profits and thus dividends.

The dividends went in the end, but the decline continued. The movement endlessly reported on itself and urged co-ordinated actions, from regional societies to buying groups. Many of these things came to pass, but long after they were recommended. Ironically, the failure to co-ordinate by design led to co-ordination by dint of failure. Societies owing money to the CWS for goods bought but not paid for might be swallowed up by them by way of avoiding liquidation or by the Co-operative Retail Society (CRS), created by the CWS to expand into so-called ‘co-operative deserts’ and later an independent body in its own right.

Because of a feature of the law governing co-operatives, a society facing insolvency can only merge with another co-op or be wound up; a trade sale to a private rival isn’t an option. As a result, societies with poor cash flows (or more often than not underfunded pension schemes) but with an asset base of the shops acquired over generations would merge with societies with stronger cash flows. Whilst some mergers were clearly done from a belief in the advantages of greater scale, the majority were defensive rescues by the bigger societies, which started to coagulate like mercury in a Petri dish. By the mid 1990s, the CWS stood with the CRS as the giants in the field, surrounded by the remaining 100 or so smaller societies. The patchwork of the larger empire made little sense, being rescues rather than mergers, with distribution and logistics often in completely the wrong place. It was at this point, in 1998, that the CWS suffered the threat of near demutualisation when corporate raider Andrew Regan led an assault on the society. The approach was defeated and some executives went to jail for providing inside information to the raiders. (Regan himself was eventually acquitted at his second retrial). This was the wake-up call needed and within two years the CWS and CRS had merged to form the Co-operative Group. A commission led by the TUC’s John Monks proposed a new unified brand (green for shops, lilac for undertakers etc) and, as the long boom of the noughties floated all boats, a generation of elected activists that had seen the movement at its nadir began to think that the ship thus righted could begin an altogether more ambitious voyage.

It was into this moment that Peter Marks stepped. Whilst Paul Flowers has become the face of the collapse, Marks bears a much, much greater responsibility, along with his Chair for his years in office, Len Wardle. Marks was a lifer, a shop-floor trainee who had risen through the ranks (elected co-operative Directors have long been distrustful of plc-types with their demutualising ways and so have placed a premium on long-service as evidence of fidelity to the values of the movement rather than, say, evidence of how cynical executives might view co-ops as a cushy number given the poor standards of governance or might simply not be deemed worth a hire by a co-op competitors). He was committed to aggressive expansion and was the leading advocate of the notion of a single co-op for the whole country, something that had been a point of debate for over fifty years but was now within grasp, with now around twenty independent societies left.

The co-op he headed — United Co-operatives — was the country’s second largest and merged with the Group to create the largest consumer co-op in the world and Marks was soon appointed its CEO after driving the merger (something of a mutual movement tradition) and he made the acquisition of Somerfield a priority. That goal achieved, next came the takeover of Britannia in 2008 and, soon after, the Lloyds bid which would have made the Co-op Bank a much greater force, achieving, according to Marks, twenty years’ worth of organic growth in two.

This voracious appetite attests to the merger madness that often precedes financial distress in an enterprise. The executives wanted growth and the Board put in place to control them utterly failed to provide the necessary scrutiny; partly, no doubt, due to Marks’ abrasive and challenging style which often saw him lecturing his Directors publicly (as well as the wider movement) and one can imagine the scenes in the Board room deals were put before them. Even so, they wouldn’t have needed much cajoling in any case as they shared the ambitions.

All of the deals went depressingly, catastrophically bad. In 2014, the entire Somerfield acquisition was written off (and most of the stores themselves were sold off in 2016) as the Group made a strategic decision to focus on convenience retailing, where it was strong, rather than the mid-to-large stores, where it wasn’t and around which Somerfield was based. Britannia turned into the worst deal of all, though there’s little doubt that Lloyds Verde would have taken that accolade had it not been aborted at the eleventh hour as reality began to intrude on the leadership in the manner of water seeping through a failing dam.

It is these deals, and the culture that enabled them, that the diplomat Sir Christopher Kelly and former City Minister Paul Myners were commissioned to investigate; Kelly to probe the collapse of the Bank, with Myners making recommendations for future governance of the Group. Kelly’s report is as dry and judicious as one would expect from a man of his experience and although he concludes that the deal should never have been done, he can’t land the knockout blow as to who was at fault. As no documentary evidence was presented to back it up, he skips over suggestions that the merger was instigated at the behest of figures in both the Government and the Financial Services Authority anxious to avoid Britannia’s collapse, speculation encouraged by the close links between the Group and the Labour Party, especially Ed Balls. In truth, even if it were proven, it wouldn’t tell us much, for the executives and board didn’t need any encouragement such was their dash for growth.

As thorough as the Kelly and Myners reviews are, neither address the key questions that the affair poses. The smoking gun here is the reason why the Co-operative Bank did the deal despite Britannia being, to use the technical term, a basket case. The Bank board commissioned the requisite due diligence as part of its exploration of whether to do the deal or not, whereupon a very curious thing happened.

When the analysts from KPMG arrived at the Staffordshire HQ of Britannia and tried to look at the commercial loan book on property developments the society had invested in, they were forbidden access to the documentation. This was tantamount to searching for a bomb in every room in a house bar the one locked room that actually contains a bomb, then giving the house the all clear, only for the bomb to go off and destroy the house. The fault, surely, lies with the bomb disposal team, not their superiors who relied on their assessment. The auditors are clear that they brought this to the attention of the executives but some of those Directors are adamant that the report presented to them on the solvency of Britannia made no reference at all to this. JP Morgan Cazenove reported to the board that the logic for merging was ‘compelling’ and that the KPMG due diligence ‘exceeded that normally undertaken for listed companies’. A bold and very important claim, which is unsupported by what KPMG actually did and a claim for which Kelly can find no documentary evidence being presented to JP Morgan to justify. Kelly concludes they must have taken it simply on the word of the executives (JP Morgan Cazenove charged £7m for their work before and during the acquisition).

The Bank and Group received a green light from the FSA and moved to a second more detailed phase, when an even more curious thing happened. KPMG, who had been expected to conduct a more thorough assessment of the corporate loans, were told by the Bank’s management that they were not required to undertake a fuller assessment of the loan book, which the Bank would handle itself. As the deal got closer, Britannia’s position worsened, and a paper detailing developments was prepared for the Board of the Bank but then never tabled, which Kelly describes as a ‘major error of judgement’. You can say that again.

These errors was compounded by the taking on of senior Britannia executives (that movement tradition again) and then a failure to get to grips with the said toxic loans whilst they might have had better chance of doing something about them.

Kelly reserves most culpability for the Board as a whole — a formalistic position that maps onto the legal reality that the buck stops with them — yet neither Kelly nor Myners have an answer as to how any board can realistically gainsay what they are being told by their appointed professional managers, their appointed non-executive expert Directors, their appointed professional advisors, their statutory regulators and their Government’s Ministers.

To see this as a peculiar problem for democratically managed organisations is fanciful, yet Myners does so anyway and with some gusto. His proposal that a certain type of professional plc-person (rather like himself, one might say) is much better placed to hold executives to account is simply untenable in a world of LIBOR manipulation and instead comes over as an exercise in neo-liberal snobbery: better to have appropriately qualified and remunerated technocratic experts than the appalling vista of democratically elected ordinary people. That the structure he proposes looks remarkably like that used by the Britannia Building Society in getting deep into the mire is an irony seemingly lost on him.

That isn’t to say that some of his recommendations aren’t perfectly reasonable. For example, his proposal to give the mass of members direct input would correct an anomaly which arose out of the fear, following the near-demutalisation in 1998, that the ordinary members’ potential to be bribed by demutualisers was best countered by removing their ability to be involved directly in any meaningful way. The other route, of making the co-operative’s ownership by millions of people so patently valuable and cherished that members would scoff at the notion of demutualisation if ever presented with the opportunity, was, tellingly, never at the races.

The resulting constitution from the merger with the CRS was a confusing mishmash of bodies, in which few members voted in elections in which candidates could not canvass nor say anything publicly about their candidacy, in order to sit on bodies that generally have no power whatsoever, because their main function is to provide the gene pool from which the next and altogether more active bodies are constituted — again, with no canvassing allowed; during the recent crisis, the area Committee on which I sat had a vote to elect two members for the regional board; none of the three candidates could do anything but read a short prepared statement and so we solemnly elected two representatives to the next tier of governance in the middle of the worst crisis in 150 years with all candidate prohibited from speaking to their electors about their views on said crisis.

After a time, those regional representatives might have gotten onto the main national board, whereupon they will be silenced by the omerta of commercial confidentiality. It’s a relic of a thankfully bygone age and the only surprise is that despite this some 3% of the Group’s eight million members could still be bothered to actually vote.

What we’re really talking about here is, in political science terms, Michel’s notion of oligarchy, in which executives and officials will invariably seize power by dint of the ever-increasing technical nature of enterprises, and their greater control of information flows. In business schools, the same complex goes by the name of Principal-Agent problem: how do you get the staff to act in the name of the owners and not their own?

The solution to this in the corporate world has been to try and align incentives, so success for executives is success for the enterprise and vice-versa, whilst stacking the board with professional types who can keep an eye on the buggers, but with little real success.

To be sure, co-operative retail societies have proven poor at it too, but a large part of this comes down to the sheer god-awfulness of the standards of democratic participation. Any political community in which fewer and fewer care, fewer and fewer stand, and fewer and fewer vote will tend to elect people of less and less capability. The career path from bottom to top could take twenty years, and the process rewarded those who rose without trace and had few strong opinions on radical change.

It’s a concern that has been expressed time and again, to little effect. Tony Crosland, the Secretary to Hugh Gaitskell’s 1955 Review of the Co-operative Movement, felt it was a lost cause since people simply didn’t want to be bothered with controlling the societies of which they were members. Successive generations of co-operative activists failed to respond to the challenge and both executives and Directors shared a common goal in rhetorically cherishing the virtues of an active membership who could hold them both to account whilst doing precisely nothing that might actually bring it about.

But it’s not just self-interest that kept things from improving. The co-operative movement has been much better at changing society than it has at then responding to that change itself. The world that created co-operatives started to disappear, in many respects thanks to co-operatives and their superb record of reducing inequalities and promoting education. But as that world disappeared so did the people who saw themselves as part of the co-operating classes. The people who’d never had it so good (and their kids) were less inclined to see the need to unite through consumer power to get themselves a good deal because that deal was now everywhere to be found, though increasingly not at the co-op.

The slums which had fostered a sense of working class identity were giving way to semi-detached estates and Margaret Thatcher — whose grocer father would have seen co-operative societies as a scourge — told Conservatives struggling to make the case for free markets to ask their constituents whether they’d rather shop at the Co-op or Marks and Spencer in the same way she would later consider a man over the age of 26 using a bus to be a failure compared to her ideal car-driving free-market citizen.

Paul Myners’ brief meant he had to focus on what it would take to make the Co-operative Group a better-governed and more successful enterprise in its current form. It’s tempting to propose you have to choose two from three of being financially successful, being democratically controlled and being a national business. Previous generations have tended to prefer the last two but, with a banking syndicate breathing down their necks, the longstanding management desire to downgrade the democratic element has finally won out.

What was never on the table was downscaling to something less monolithic, taking heart from the performance of smaller, regionally based co-operatives that held out against mergers, like the Southern and Midcounties co-operatives, both with impressive financial, ethical and co-operative records, closer to members and with better democratic credentials.

The Group’s development owed far more to the contraction of co-ops over the last century combined with that era’s management school assumptions that big is always better. It was assumed that operating at scale would make for better margins, cheaper products and higher sales volumes, as if these things in themselves would be a good co-operative return. But co-operatives are not just about outcomes and outputs; the process matters too and in this respect the Co-operative Group was a very poor co-operative indeed. Myners is surely right that it’s difficult to run a business at scale with a half-hearted mechanism of participation and involvement that delivers neither good governance nor customer engagement but, because he’s as much a product of this same last-century business school thinking, that takes him in one direction only, away from an economy in which smaller has a great many virtues, not least being a scale better suited to participation in a co-operative.

The bigger question is whether the Group’s best work might have been done, to the extent that it is time to consider whether it should carry on at all. The earliest Building Societies were called retiring societies; when all its members had saved together to build their homes, the society would dissolve, its work done (ones which stuck around were called ‘permanent societies, hence the Leeds Permanent and so on).

As institutions as much as enterprises, co-ops have a greater resilience than other corporate forms, but that longevity can lead to never asking the question as to whether what we’ve been doing is what we should be doing. In a standard company, market opportunities and potential for investor profit dictate the answer, hence, for example, Nokia migrates from wood milling and rubber production to consumer electronics to mobile phones. But in a co-operative, the question should be based on whether the business’ activities represent the best use of members’ capital to provide member benefit, and it won’t be asked by the Group’s leadership now or anytime in the future.

As the gap between rich and poor grows, as the planet warms and the state withdraws, the grandchildren and great-grandchildren of the post-war generation will likely not have it so good. They need jobs that pay well and provide secure livelihoods and homes they can afford to live in powered by energy they and the planet can afford. They might want public utilities owned by themselves so as to prevent rentier exploitation, and community facilities owned outside the neoliberal world defined by markets and prices and its statist alternatives. They might use the possibilities the internet brings to enable human collaboration at a scale unimaginable to the Rochdale Pioneers and so reboot what democratic member control can be from the staid and elite-creating of apathetic representative democracy to something that fits people’s lives, lifestyles and changing commitments and identities, being Co-operators for a time, whilst co-operating much more.

Instead, we’ll get divestment to pay for the ruinous Marks-Wardle era. The Bank has already gone, as have the farms, which could provide a tangible sense of reconnection with the food system or be used for community-owned renewable energy generation. The pharmacies have been sold off to Private Equity and the funerals probably won’t be too long behind them, leaving around 4,000 varyingly appealing shops about to get into a war to the death with Aldi and Lidl and Tesco and Asda and Morrisons and Waitrose and Sainsbury’s in which the victor gets to enjoy extremely low margins.

The new governance system tends against members tabling resolutions on the ethics of this or that element of retail (think boycotts of South African food and Fairtrade) which makes it less likely to perform the function of setting a higher bar for supermarkets as a whole, especially on those thorny issues that rivals run away from as too political. The Board will be skewed towards ‘top men’, who will use likely use the Board’s power to veto any changes to the constitution it doesn’t like. With no exit for the shareholders or chance of a sale to a new board, the Co-operative will have a board with plc-powers but without the plc-accountability.

It’s likely that they’ll continue to sell assets here and there to pay down current debts and cover newer losses. When Mother Hubbard gets to the cupboard and discovers there’s nothing in there that can be sold, some bright spark will propose a debt-for-equity swap or some whizz-bang piece of corporate paper that brings in private investors. The prospects for the Co-operative Group in ten years time are likely to be even worse but the opportunities for co-operatives really are becoming more urgent. It was ever thus.