An interview with Dr Torsten Lorenz, published on Current Concerns no 15, August 29, 2011.
Current Concerns: Four years ago the “Dresdner Hefte” have published your fundamental article “The development of the European Idea of the Co-Operative” (see also Zeit-Fragen No 9 and 10, February 28 and March 7, 2011). Meanwhile the world is moving towards a new economic crisis. Is the idea of the co-operative getting more important in these times?
- Torsten Lorenz: I should start with stating that I am an expert of economic and social history and hence I am watching our current economic reality with different eyes than for example an economist. Sometimes we historians are jokingly called “backward prophets” and, since we are dealing with the past, we are cautious with projections into the future. When I was writing my article on the origin of the idea of the co-operative I could not anticipate that the idea of a sustainable economy based on co-operation would soon gain such topicality.
- The current financial crisis has many reasons whose results superimpose each other and hence are difficult to distinguish. The crisis started with the so-called “sub prime crisis” in the US which was triggered off by a failed housing support policy. When the payment defaults connected with US mortgage credits increased, the system of mutual bonds began to totter. Some banks crashed, others were saved with state money to prevent a collapse of the world finance system. In the end of 2008 the crisis seized the real economy and the leading economies of the earth suffered massive economic declines. Eventually it turned out that some countries in the euro zone had mismanaged their economies and were suffering from large budget problems. And on top of all that the US are today threatened by insolvency.
- I would not go as far as the great British historian Eric J. Hobsbawn who in May 2009, in an interview with the German Stern, predicted the end of capitalism; Hobsbawn had no choice – after all he is a Marxist. Since the “tulip mania” of the 1630s there have always been economic crises and, even if there have been redistributions of wealth connected with them, they have neither been the end of the world nor of capitalism. In economic crises, including our current one, we see the motion of a pendulum where institutional investors but also so-called speculators withdraw from one market in order to invest into another one – always with the goal of maximizing profit and reducing the risk of loss. These are the laws of the market. It was like that during the world economic crisis after 1929 and is still the same today. Today, however, globalization is much stronger, especially the global linkage of financial markets. It bears enormous chances – for small investors but also for large ones like pension funds, but at the same time enormous risks since, as we are witnessing today, the crisis of one market participant may grow into the crisis of the whole system.
- At the same time one cannot help thinking that a hidden and, as far as I can see, never considered reason of the current misery is the end of socialism: The contrast of systems and the West’s ignorance of the catastrophic economic situation in the former Eastern Block contributed to the market participants practising moderation which was expressed e.g. in the German regulatory policy of the “social market economy”. With the cessation of the East-West antagonism the geo-political competitor of the “western” faction ceased to exist, granting capitalism a full victory. The triumph of neo-liberal thinking in the sphere of ideas was reflected by a deregulation in regulation policy: The spirit of capitalism is out of the bottle and it will be hard to re-capture.
- All the more I think it is necessary to fence it in. For me, the idea of co-operatives and the public sector look like a promising starting point. However, a more attractive advertising for it is necessary and also the promotion of the subject of “economy” in our schools. Many things are in a sorry state in Germany and it is incomprehensible for me that, in face of the importance of economy today, it is not taught at schools consistently. Incidentally, since their emergence in the middle of the 19th century, co-operatives have been active in economic education: in addition to their economic goals – fostering the enterprises – co-operatives always had social goals which generally included, as can be shown historically, the promotion of economic education among their members. This is also one of the historical achievements of co-operatives.
Where in the German speaking world – or beyond it – can we observe that the idea of the co-operative is not only expanding but also entering new areas?
- Basically, the idea of the co-operative does not need to be revived. It has been alive all the time and still is. But we have to consider that it has changed – just like its institutions, the co-operatives that are active on the market. More than ever before, co-operatives are exposed to the cold wind of the market. Retail co-operatives, where they have survived, are in a direct competition with the private retail stores including the discount supermarkets. In Germany they have hardly survived this competition – mainly due to mismanagement within the corporate system – but they continue to exist on a regional basis.
- The German credit co-operatives have proven very robust and successful: they have a simple and clear business model mainly by accepting deposits from their customers and lending to private and commercial debtors. Their central institutions are differentiated into supra-regional and regional units and comply with the standards of sustainability and transparency due to their clear mandates. The regional principle – limiting activities to a certain region – allows recognizing credit risks more easily. Eventually, due to their organization, credit co-operatives can focus on their core business and are widely immune against the management trends which are also responsible for the current crisis. History shows: co-operatives have been successful where they got actively involved into market economy, adapted to the changing market conditions and limited their activities to their core competences. Adaptability and a healthy conservatism were key factors of success.
- Numbers speak for co-operatives, and there are initiatives among European scientists aiming at the promotion of the idea of an economy oriented towards the common good, among the population and the politicians. Let us wish them good success!
What are the basic ideas of the co-operative movement that are still relevant today?
- In its central European form, the co-operative idea is a mixture of individualistic and collectivistic elements: the associates combine in a common enterprise in a voluntary way in order to jointly work for the individual company. They maintain their independence but cooperate within the common enterprise. This way the co-operative fits nicely in a market system while contributing cooperative elements oriented towards the common good which antagonize atomization and a dog eat dog mentality: only by cooperation can a co-operative flourish and increase the associates’ individual welfare. This means the co-operative idea assumes an “inclination towards cooperation” which has extensively been described by anthropologists, sociologists and co-operative scientists. It is an anthropological constant but it takes permanent efforts to build the awareness that economic success can often be better achieved through cooperation than through an individual pursuing of interests.
- In addition to that the co-operative idea is entirely democratic: every associate only signs for one share and receives only one vote in the general assembly, the highest institution of a co-operative. This principle of “one man – one vote” which distinguishes the co-operative from corporations is in spite of some modifications fostering the competitiveness on the market, (which in turn underline the flexibility of co-operatives) a fundamental principle of co-operatives. Historically speaking one could claim that the co-operatives were a gateway for democracy in society. They introduced democratic procedures at a time when wide parts of Europe were governed in an undemocratic way.
… (full interview text).
(Torsten Lorenz is long-term professor for the DAAD at the Karls University in Prague. He is researching and teaching at the Institute for Economic and Social History. At the same time he is professor at the Institute for Historical Sciences and at the Central Asia Institute of the Humboldt University in Berlin. One of his fields of research is the history of co-operatives. Currently he is working on his habilitation on Co-Operatives in Eastern Central Europe 1850-1940).