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	Can we build a co-operative economy? by Ed Mayo Fairtrade International & agencies   Jan 2012   In today’s economy, we hear a lot about competition and shares, but a lot less about co-operation and sharing. Can we build a co-operative economy?   In a fair economy, trade is between equals – each needs the other. Fairtrade is about reintroducing this kind of co-operation. It allows us to do more together - we shop, get what we need and the obstacles that face producers and their families drop. At least, that is the idea.   Perhaps not surprisingly, it was a co-operative in Mexico that launched the world’s first certified fair trade product. Coffee farmers in Oaxaca, Mexico were the producers in the co-operative UCIRI (Union de Comunidades Indígenas de la Región del Istmo), who launched the first-ever certified fair trade product. It was sold to consumers in the Netherlands under the label of Max Havelaar.   Inspired by this, around twenty years ago, a team of people in the UK, including myself (somewhat younger) started work on the idea of a wider mark, now the global FAIRTRADE Mark.   So what are co-ops? Co-operatives are member-owned businesses. They are run on democratic lines, on the basis of ‘one member, one vote’ rather than the investor-led model of ‘one share, one vote’.   It is a flexible model, but one that has enormous reach around the world. In Africa, one in thirteen people is a member of a co-operative - and it is worth adding, there are six times as many people who are co-owners of co-operative owners as there are people who have conventional shares.   The advantages of co-operating are that you can do things together that you can’t do alone. The members may be farmers who have come together, they may be the workers in a business or the consumers, or a mix of these. Co-ops cover credit unions, housing co-ops and telecoms co-ops.   Co-operatives are a part of the Fairtrade success story. 75% of all Fairtrade now comes from small-holder co-operatives. Co-op shops here have typically been first to stock fairtrade. The Co-operative Group has pledged to ensure by next year that for all the primary commodities, not just tea, cocoa and bananas, if it can be Fairtrade, it will be.   But equally, Fairtrade at its best is part of a wider co-operative movement – one that operates here at home as well as abroad.   In Scotland, in response to the power of the big supermarkets, three out of four farmers now belong to an agricultural co-operative. Farmers and rural communities benefit as a result. In the energy sector, where six big companies set the prices high and take the profits, Co-operative Energy has started in the last six months as a new national provider, offering a simple tariff, fair prices and share of any profits. It has fifteen thousand members, from a standing start.   In banking, you can watch out for a new campaign that is emerging that will call on UK consumers to move their money from the banks that caused the credit crunch to co-operative and mutual providers.   Given the way the economy is going, it is even more urgent than ever that we share economic activity in a co-operative way, to narrow the gap between rich and poor.   It is not that every penny needs to be spent with a co-operative. But for a fairer, global economy, we can at least ask every business we give our money to, to be more co-operative.   * Ed Mayo, is from the Fairtrade Foundation, Co-operatives UK. For more news visit Fairtrade International via the link below Visit the related web page
	Sustainability requires the End of Financialisation by Kristian Weise Social Europe Journal   To some it will be simple and obvious, while for others more complicated and perhaps even novel. But the point still has to be made: we will not achieve economic and social sustainability unless we see an end to financialisation and the emergence of a new economic (growth) model.   Today, the predominance of finance and financial priorities in business and politics – what is called financialisation – poses a threat to sustainability in three ways. First, and as we have come to know at great cost, finance-dominated economies are more prone to severe economic crises and recessions. Secondly, an ever greater share of economic activity concentrated in finance means that less money is invested in the productivity of the real economy.   In consequence, our economies grow and develop much slower. Thirdly, when finance dictates business strategies as it does today and investment in productivity is on the return, labour markets too take a hit. Job creation is stifled and precarious work is the name of the day. Hence, financialisation goes hand in hand with increasing numbers of working poor in unattractive service sectors.   But, first and foremost, what is financialisation? In short, it is what has been happening to our economies and in corporations over the last 30 years or more.   Financialisation captures our present situation of financial markets determining the state of the overall economy, and of financial demands dictating company behaviour. It means that developments in interest rates, bond spreads and stock prices increasingly shape economic cycles and that financial concerns, and those who voice them, are ever more influential in setting corporate strategies.   It is the predominance of financial activities over production of goods and services. And it can be vividly seen in the growing dominance of the financial industry in the total sum of economic activity.   In the 1970’s profits in the financial sector averaged 15-20 percent of overall profits in the US. In the first ten years of this millennium, the figure was 35-40 percent. And that has happened in a period, when total corporate profits have been rising as a share of US GDP.   Financialisation has become today’s face of capitalism through changes in all parts of the economy. At the company level, it is linked to the ‘shareholder value’ approach to corporate governance. It encourages financialisation of the company by maintaining that the purpose of its existence is to maximise the value of its shares rather than its long-term profits.   Inherent in this logic, the company is seen as a bundle of assets that generate different returns on investments, and the company’s purpose becomes to increase profits in the short-term by manipulating such assets through mergers, acquisitions, sell-offs and the like.   In relation to investment, financialisation is linked to deregulatory reforms of the investment chains, creating so-called dis-intermediation between owners of capital and the final destination of their investment. Coupled with market liberalisation, this has allowed financial operators to operate in a vast investment universe, involving investment and trade not only in real assets, such as debt and equity, but also in market expectations and risks in the form of a plethora of derivative products such as different options, futures and swaps.   From making up more or less the same amount as global GDP in 1980, financial assets reached the value of 212 trillion dollars or the same as 3,4 times global GDP by the end of 2010. Financial transactions equalled 15 times global GDP in 1990. Today it is more than 74 times. And the trade in financial activities is increasing 50 percent faster than trade in other goods and services.   In politics and policy-making as well as in relation to the overall state of the economy, the story of financialistaion is almost too well known. In Europe politicians have spent most of their time and tools over the last three years trying to satisfy ‘the markets’ and not much else. And in the US, it was the rumour of a possible downgrade of the US economy by one single credit rating agency that almost turned the weak recovery into a new recession in the first days of August 2011.   Well, back to sustainability.   As noted, finance dominated economies are more prone to economic crises and recessions. Researchers have found 148 examples of financial meltdowns since 1870, where a country’s economy has decreased by 10 percent or more. Through the last decades, such crises have become more and more frequent – from the savings and loans crisis in the US in the 1980s, Japan’s lost decade in the 1990s, over the Swedish, Mexican and Argentinian crises to the great financial crisis in South East Asia starting in 1997, the dot.com crisis and the Great Recession that we are still in today.   According to the IMF, financial crises on average last 18 months longer than other recessions, and it takes almost 3 years to recover pre-recession output levels. As professors Reinhart and Rogoff have shown, government debt has on average increased by 86 percent after severe financial crises.   And employment? It falls far behind… just how much is something we are still learning today. Think about youth unemployment in a country like Spain and the figures (closing in on 50 percent) are incomprehensible.   But economic and social sustainability is about more than the costs of crises. It is, fundamentally, about ensuring some kind of progress for all. Here again, financialisation is a threat.   The most important factors in ensuring economic development and labour markets that provide growing opportunities is investment in education and production (or what economists call capital formation). But as more money has poured into finance, it has been lacking in the latter. Indeed, from the 1990s onwards – when financialisation really took off – investment in the real economy has been on the retreat. There are several reasons for this. But one clearly stands out: the impatience and short-term orientations of financial investors.   When there is no substantial investment in the productivity of the real economy, there is nothing that can ‘trickle down’ to ordinary workers. Hence, the economy becomes more and more polarised – with inequality reaching levels not seen since 1928 in the US, as a witness to this – and the single most dominant job creation are precarious service sectors jobs.   Indeed, in a new EU-study it has been found that in the last two years this pattern has been strengthened: job destruction has been greatest in high- and middle-income jobs, while most new activity has been in lower-paid employment of the temporary and part-time kind.   If we are ever again to see a positive and sustainable circle of economic development and social progress we must see an end to financialisation. Visit the related web page
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