A Co-operative Recovery

Levelling up: co-operatives and socio-economic inequality

Anna Birley

Policy Officer
Co-operative Party

Levelling up

Anna Birley is the Co-operative Party’s policy officer and managed the Co-operative Recovery Partnership. She is a Labour & Co-operative councillor in south London and sits on Labour’s High Streets Commission.

Even before Covid-19, the UK was one of the most unequal countries in the developed world. The past fifteen months have deepened and amplified inequality, both in terms of health and mortality inequalities, but also in terms of the kinds of households most impacted by lockdown measures and the economic impact of Covid. In particular, the pandemic has widened inequality in education, training, wages, employment and health – impacting women, communities of colour, younger generations and disabled people especially.

Poverty was on the rise before the crisis, with average income dropping year on year, while the average income for the UK’s richest 20% or people increased by nearly five per cent between 2017 and 2018. And within that top 20%, the wealth gap is extraordinary too. The richest 1% were worth about £547 million pre-crisis, and the UK is home to the fifth most billionaires in the world. To put that into context, the wealthiest 100 people in the UK have as much money as the poorest 18 million.

This inequality isn’t just bad for those at the bottom of the income scale who are experiencing a decline in living standards – it affects everyone, whether we realise it or not. A more equal society is a more economically successful one, and a more unequal society will be more prone to shock, feel its impacts more deeply and take longer to recover.  It’s no surprise therefore that the UK’s economy was one of the worst hit in the developed world. The inequalities that defined it made it fragile and vulnerable – and unless we make some very different choices through our recovery, we will feel the negative effects of this crisis for longer.

And we can’t simply work ourselves out of this crisis either. As well as measuring up poorly in terms of inequality, we lag behind our neighbours on productivity too. The independent reported in 2017 that British workers were 27% less productive than their German counterparts. Since 2008, British productivity has essentially flatlined, running almost 20% below its pre-financial crash trend.

The problem is cyclical – low productivity keeps wages low and exacerbates inequality. Inequality damages our economy and future perpetuates low productivity. However the flipside of this is that the converse must apply. That higher productivity and greater equality go hand-in-hand, and that this can create a virtuous upwards spiral too.

In the co-operative movement, we know from centuries of experience that inclusive business models and a democratic economy are the tonic for falling productivity. Companies and organisations in which employees have a real influence, and especially when this comes with a genuine ownership stake, are more productive than organisations where this is not the case.

Widening ownership is the antidote to inequality too. The conditions that enable co-operatives to thrive also help create a narrower gap between the rich and poor and reward responsible corporate behaviour. This can be seen in communities like Emilia Romagna in Italy, where co-operative enterprises generate close to 40% of GDP in the province resulting in the lowest socio-economic inequality of any region in Europe.

In the UK, the co-operative sector is worth £37.7 billion to the economy each year – which although laudable is a small proportion of the UK’s economy which remains dominated by private interests. This isn’t to say that a larger co-operative sector isn’t possible. In Italy, co-operatives are worth an estimated EUR 136.5 billion. In Norway, more than 40% of people are co-operative members. Seven in ten people in Quebec, Canada, are co-operative members. 90% of Japanese farmers belong to a co-operative and co-operatives account for 36.4% of all retail sales in Denmark.

Despite the benefits, co-operative growth and expansion in the UK are hindered by a legislative and regulatory framework that is designed for privately-owned businesses. While member finance and community share offers have been very successful in financing community energy, co‑operative pubs and other projects and enterprises, the unique structure of co‑operatives means they are often excluded from traditional investment methods. This unequal playing field places the sector at a competitive disadvantage.

A government serious about growth needs to put its money where its mouth is and invest in co-operative expansion. And if we are going to take seriously any rhetoric on “levelling up” co-operative growth is even more critical. Too many regions of the UK have not benefitted from the economic growth that London and the South East have enjoyed. Economic and political power have become increasingly concentrated in the capital, creating an unequal country where opportunities and wealth are stacked in favour of those living and working within the M25.

Investment in co-operative growth can be targeted in those areas of the country with the greatest economic challenges, and those which have been hardest hit by Covid to stimulate and support sustainable economic growth that doesn’t depend on the whims of private investment or Whitehall funding decisions.

This work has started already in places like Greater Manchester and South Yorkshire, where the metro mayors have led investigations into their local economies and developed recommendations to support the sector. The Greater Manchester Co-operative Commission has proposed a co-operative enterprise zone, for example. These commissions show how answers can be developed locally, led by and responsive to local economic need and aspirations. Similar work is set to begin in West Yorkshire, Cambridgeshire and other mayoralties and council areas.

To build a fairer, more resilient and more productive economy, this has to happen across the country. Co-operation must become the mainstream option. This won’t happen without intervention – at a bare minimum, the barriers to co-operation need to be taken down. But to have a transformational effect, we must make the case for more proactive intervention. Investing in co-operative development, and levelling the legislative and regulatory playing field, would enable one of the economy’s most resilient sectors to lead our recovery, ensuring productivity rises, our vulnerability to future shock is reduced and we create a fairer distribution of wealth.

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Promoted by Joe Fortune on behalf of the Co-operative Party, both at Unit 13, 83 Crampton Street, London, SE17 3BQ, United Kingdom. Co-operative Party Limited is a registered Society under the Co-operative and Community Benefit Societies Act 2014. Registered no. 30027R