The world finds itself in crisis with a global recession on the horizon. Crises of this calibre tend to generate a shift in paradigm. World War II led to the post-war consensus, with both UK major parties pursuing Keynesian economics characterised by a mixed and closely regulated economy, a nationalised industry and a welfare state.
In the aftermath of the 2008 economic crisis, governments across the world started introducing more regulation for the financial sector and the Basel III agreement introduced new capital requirement standards. In the US, a Troubled Asset Relief Program (TARP) worth US$700bn was passed to address the crisis and saw the then government purchase toxic assets and equity from financial institutions to strengthen its financial sector. In comparison, the Covid-19 emergency relief bill approved by the US Senate on 25 March is worth US$2.2tn. The UK government has also promised more than £330bn of loans and guarantees to help firms continue operating.
With millions of workers across the world unemployed and businesses unable to provide services, governments are spending to fight the economic downturn. Coupled with this is a trend amongst consumers to expect businesses to pursue long-term stability rather than short-term profit and do more for their local communities. A 2019 research by Edelman showed that businesses are more trusted than governments and brands are expected to take a larger role in society. Consumers will sanction businesses that fail to look after their employees during Covid-19.
As people-centred businesses, co-ops can show how they are there for their members and their communities. In Italy DocServizi, a co-operative of freelance artists, is fighting to secure unemployment benefits for those in the show business sector. In Spain, health co-operatives are collaborating with the authorities to slow down the advance of the pandemic and serve the infected people in the best possible way putting their hospitals and medics at the government’s disposal. In the UK retail co-ops are helping food banks provide essential items for those in need.
A number of businesses will also go bust as a result of the crisis. Could there be an opportunity for employees to take over these businesses and member owners of a worker co-operative? In Italy redundant workers can use their accumulated unemployment benefit to capitalise a buyout co-operative. Similarly, in France, the employees can initially own a minority share in the capital and still have the majority vote. Covid-19 could make other countries adopt similar legislation.
Change could also occur at local level. Prioritising local businesses in public procurement and helping to set up local co-operatives, an approach pioneered by Preston City Council, could soon be employed by other local authorities across the world.
At the same time, the world of work is changing at a fast pace, with technology leading to a rise in gig economy workers. Here, too, co-ops can present an alternative through platform co-operatives, which enable users to own and have a say in running the platforms they use.
In his latest book Nobel prize winning economist Joseph Stiglitz explains how few corporations have come to dominate entire sectors, while others have generated profits through exploitation rather than through wealth creation. His vision of a “progressive capitalism” includes exploiting the benefits of markets whilst ensuring they work for everyone, not just a few.
With income inequality likely to continue to rise in the most advanced economies across the world, free market capitalism will become more and more contested, leaving room for a social and solidarity economy approach.
While they do not hold the answer to all of the world’s problems, co-operatives can certainly contribute to the solution. It is this reasoning that has led the United Nations to highlight the role of co-operatives in achieving the Sustainable Development Goals (SDGs).
