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A House of Cards

Welsh co-ops report points the way forward

Parallel announcements of job cuts across the UK underline the price of the so-called “recovery” as it affects the lives of the majority of ordinary people caught up in the global economic crisis. A timely report from the Welsh Co-operative and Mutuals Commission sets out a new path.

Steelmaker Tata, part of an India-based transnational conglomerate comprising over 100 operating companies in seven business sectors, is reducing its workforce by 123 in Newport, South Wales in response to reduced demand for its electrical steels.

This is much more than ironic because coal, iron, steel and even railways were exported from Newport and Cardiff to India and other parts of the then British empire at the height of the industrial revolution.

Shared Services Connected Ltd (SSCL) is a little-known joint venture formed last November between the Cabinet Office and the UK arm of French IT services group Steria with the aim of cutting the costs of the government's back office functions.

The Public and Commercial Services union (PCS) expects its members’ new employer to close offices in Cardiff, Sheffield and Leeds with additional losses in Blackpool, Newcastle, Peterborough and York, amounting to 500 jobs, many being transferred to cheaper sources of labour overseas.

A cynic might say that this is just business as usual, the unfortunate consequences of the operation of the global “free market” in commodities produced by the application of capital and labour. And to some extent – stripped out of the immediate historic context – they’d be right.

But the crash of 2007-8 showed that the credit-induced period of globalisation of that system had reached its limit. The recession that followed has resulted in huge over-capacity in many countries, including in China, the world’s second largest economy.

This new round of job cuts and capacity reduction comes after five years of ultra-low interest rates set by central banks around the world, the lowest in their history, have failed to bring about a real recovery. Manufacturing production in the Chinese powerhouse of globalisation is not slowing but shrinking, and it’s not being replaced elsewhere.

So it is high time to think about and begin the process of bringing an embryonic new system fully into existence, taking the place of the one which has burnt out. And we can look to South Wales for that, too. As Professor Andrew Davies Chair of the Welsh Co-operative and Mutuals Commission, writes in the report:

Many have argued that we are faced with an extensive and systemic breakdown of trust in our society: between citizens and many of the major institutions in civil society and between the individual, the state and the political process.

Much of this suggested breakdown derives from the global banking and economic crisis in 2007 and the continued world economic down-turn and the anaemic recovery in the UK, triggered by scandals in the banking sector and recent corporate failures in other sectors which has led to extensive questioning of the ways in which our economy and society is run…

The orthodoxy of the neo-liberal, free market philosophy which has dominated governmental, political and economic thinking over the last forty years is now being widely challenged for the first time in many years. This widespread disillusionment has led many people to look for alternative, more ethical and socially responsible ways of organising businesses and services, particularly those run on a co-operative, mutual or not-for-profit basis.

The report “aims to create a culture and policy environment in which co-operative ways of doing business are the norm, not the exception”. It’s easy to argue that the report doesn’t go far enough. But it’s a great place to start.

Gerry Gold
Economics editor
5 March 2014

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