SOCIAL MARKET FOUNDATION
Why do co-operatives and mutuals exist and persist? If co-operatives and mutuals were a recent invention then they might be thought to have been an interesting idea but not one worth supporting, given that they have failed to take significant market share. They could indeed be allowed to go to the wall, with their small market shares being taken back by normal companies. But this is not the case. What is strange – a puzzle that deserves to be solved – is that despite having been absolutely dominant for more than a century, shareholder-owned firm (plus privately owned) have failed to displace these co-operatives and mutuals. Why? To answer this question, it may be worth considering why these alternative corporate forms developed in the first place. The answer, largely, lay in one word, in a single concept: namely, trust. At the time of the industrial revolution and subsequent spread of capitalist production, with companies owned by private industrialists and subsequently by external shareholders, consumers did not trust those owners to supply good quality food. Co-operatives emerged largely because consumers felt they could have more trust in the company if it was owned by them – the customers – and if its corporate objective was thus to provide them with good quality, safe food, as opposed to a company whose purpose was to make financial returns to private or external shareholders.79 The puzzle of the continued existence of these ‘alternative’ forms is perhaps particularly striking in the case of mutual building societies. Our economy is absolutely dominated by privately owned companies (owned individually or by external shareholders). These are the type of organisations we do business with for the vast majority of our transactions, on a day-to-day basis, and in life. We clearly trust them to some extent, as we hand over our money in exchange for the goods 79 For a review of the economic literature on the concept of ‘trust’, see Russell Mannion and Huw Davies, ‘The economics of trust’ in Jonathan Michie (ed.), The Reader’s Guide to the Social Sciences, (London and Chicago: Fitzroy Dearborn and Routledge, 2000).
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