Co-operation and Globalisation

The British Co-operative Wholesales, the Co-operative Group and the World since 1863

Anthony Webster

• Publisher: Routledge
• Year: 2019
• ISBN:
  9781351386128
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

Globalisation is associated with capitalist multinationals dedicated to the enrichment of wealthy, corporate shareholders. However, less well known is that the English and Scottish Co-operative Wholesale Societies, owned by the growing number of local co-operative societies across the country, were early leaders in global commerce.

Owned by their working-class members, by 1900 there were over 1, 000 societies and millions of individual members. Spreading profits widely through the 'divi' which rewarded members shopping at the co-op store, and selling safe and wholesome food, the co-operative movement was a successful part of the emerging labour movement.

This success depended on the wholesale societies supplying societies with commodities from all over the world. Because local societies were free to source produce from whoever they chose, competitive pressures required the wholesale societies to develop the world's most formidable network of international supply chains, with branches, depots, plantations and factories in the USA, Canada, Denmark, Sweden, Spain, Greece, France, Germany, India, Ceylon, Australia, New Zealand, colonial West Africa and Argentina.

This book explains how the wholesales developed and managed these networks, giving them a competitive advantage in their dealings with the local societies. It will explore why and how this 'People's Global Colossus' declined in the later 20th century, and how its focus in international commerce moved onto ethical sourcing, investment and Fair Trade.

Integral to these global networks were the UK movement's relations with foreign co-operative movements, especially through involvement in the International Co-operative Alliance, and promotion of co-operatives in the Empire by successive British governments as a tool for economic development. The 'People's Colossus' was thus a political as well as a commercial player in the increasingly complex world of the late 19th and 20th centuries.

1
Mr Bates Goes to Washington

Industrialisation, Consumerism, Overseas Trade and British Co-operation 1800–1890—An Overview

I

On 20 August 1892, the English Co-operative Wholesale Society (CWS) Director, William E. Bates, disembarked in New York from the S.S. Etruria, arrived that day from Liverpool. He was beginning a two-and-a-half-month tour of the US as a representative of the CWS, exploring the mercantile links that it had developed across North America, and he was empowered to make new deals with new trading partners. It was to be an intense and exhausting ten or so weeks, involving daily rail travel as well as countless meetings with people he had never met before. But as is perhaps less and less the case with modern business trips, there were also opportunities for sight-seeing and recreation. On his first night, Bates was whisked to the New York resort of Coney Island, where he freely engaged in the amusements it offered. He noted in his diary that there was a roughness about the place that “would not do for the goody, goody sort of people”.¹ But business quickly moved centre stage. The next few days were spent mainly in the New York Produce Exchange (which also housed the CWS’ New York branch), with Bates meeting a long procession of New York dealers, merchants and brokers, many of whom provided letters of introduction to merchants and manufacturers across the continent. The whirlwind tour began on 29 August, with Bates and his companions reaching Buffalo on the 31st of the month, where he met local leather merchants with a view to securing supplies for the boot and shoe factories owned by the CWS in the East Midlands. On 1 September, Bates met with the Chicago producers of tinned meat, Armour, and a week later held talks with Pillsbury’s, the grain miller in Minneapolis. En route to meet a range of fruit growers and salmon packers in Washington State and California, Bates travelled through Montana, where he saw native Americans on horseback: “The women rode like men. They were dressed like the Indians brought over by Buffalo Bill”.² Bates’ tour took him through Salt Lake City, Denver, Omaha, Kansas, St Louis and Louisville, with deals done along the way to supply CWS with leather, a wide variety of foods and even a consignment of pick axe handles! Perhaps the high point of the tour was in Washington, where, after a visit to the Capitol and the sights, Bates was introduced to the Republican President of the USA, Benjamin Harrison. Such were the circles in which senior CWS figures moved. Bates’ tour continued through Baltimore; Portland, Maine; and Montreal before he returned to New York. His last meeting was with the mayor of New York, before he departed for Liverpool on 4 November.

Bates’ diary is a remarkable document, capturing as it does a colourful mixture of the personal, the mundane and the extent of the CWS’ integration into the US business world after fewer than 20 years of operations from its New York branch. But what it signals most emphatically is just how major a player the organisation had become on the global stage, just 30 years after it first commenced operations from a small office and premises in Manchester. Bates’ handshake with the US president indicated that CWS (and through it the co-operative movement in England, and its corresponding organisations in Scotland, including the Scottish Co-operative Wholesale Society) occupied a position in the world that commanded the attention of national leaders, as well as the phalanxes of merchants, manufacturers, farmers, bankers and brokers who were integral to the operation of both major national economies and the emerging global system of international commerce and finance.

This book offers the first detailed analysis of the global supply chains and trading system that the two British co-operative wholesales constructed, and that enabled them to become, for a time, arguably the most sophisticated international commercial operator in the world. It addresses important questions about the wholesales as both commercial operations and political actors on the domestic and world stages. In many ways, it is a companion to an earlier volume that the author wrote in collaboration with John F. Wilson and Rachael Vorberg-Rugh, Building Co-operation, and it picks up on some key themes for which there were too limited space to address comprehensively.³ In particular, it will examine in detail how and why the wholesales extended their overseas activities so rapidly and so widely. The New York branches mentioned in the opening of this chapter were established in 1875, just 12 years after the English CWS was established, and new branches in Copenhagen (1881) and Hamburg (1884) followed swiftly. The reasons why this reaching out across the seas occurred will be explored in later chapters. A major theme of the book will be the strategies that guided the management of the wholesales’ expanding global connections and assets. Today, the strategies and methods by which retail and other businesses organise themselves to ensure that commodities for sale are produced or procured to the requirements of consumers and delivered on time at a price that consumers are willing to pay is known as supply chain management (SCM). It will be argued that while it would be anachronistic to describe the international commodity procurement strategies of the wholesales as SCM in the strictly modern sense of the concept, they were nonetheless more sophisticated than suggested in some of the literature on the practices of companies in the pre-SCM period.

To help illustrate the point, it is worth running through the main features of modern SCM as conceived by academics and managers and considering them briefly in respect of the practices of the wholesale societies. These include: increased control by retail organisations over secondary distribution (that is, the transfer of goods from warehouses to shops); greater control by retailers over the production and delivery of manufactured stock; enhanced control of information about the supply chain to eliminate inefficiencies and to minimise inventory (the amount of stock kept on hand to ensure that demand can be met); and more effective response to demand and customer requirements, or ECR (Efficient Consumer Response).⁴ Central to the maturation of SCM as a discipline from the 1980s onwards was the greater assertion of control over the supply chain by retailers: in effect, a shift of power away from manufacturers and other ‘links in the chain’, such as wholesalers, towards retail actors.⁵ Implicit in this was not only far closer collaboration and information-sharing between increasingly dominant retailers and their suppliers but also the effective take-over by retailers of key functions of those suppliers, including branding and even marketing.⁶ The assumption is that not only were manufacturers the masters of supply chains before the 1980s but that retailers were also essentially ‘passive’ in their operation, working on hope as much as anything.⁷ Studies of food retail companies, even quite large ones, have tended to confirm this perception of a lack of structure or scientific organ-isational management. In the UK, fresh food supplies to retailers before the late 1900s have been described as ‘disorderly’.⁸ Tesco, the supermarket retail giant, is a case in point. In the 1970s, manufacturers and suppliers held the whip hand when it came to delivering to Tesco stores, while ordering was left in the hands of individual store managers, with little or no central control. It was only when the existing arrangements proved inadequate to successfully supply the stores during Operation Checkout, launched in 1977 to massively expand business, that reforms were implemented that led to the successful and sophisticated SCM systems of the end of the twentieth century.⁹ Of course, modern SCM also makes extensive use of very modern computer technologies that allow automatic electronic ordering and the optimisation/minimisation of inventory and storage through ‘Just in Time’ (JIT) ordering and supplying—technologies that were simply unavailable 40 or so years ago. In this sense, SCM is very much a product of the modern age.

But it will become clear that, modern technological capabilities apart, even during the last decades of the nineteenth century the British consumer co-operative movement and its wholesale wings cannot be characterised as passive, haphazard, disorganised or at the mercy of manufacturers and suppliers. Indeed, building the capability to manage its supplies in a coherent way was prioritised in the developing structure of the consumer movement from a very early stage in its development—in 1863 with the formation of the English Co-operative Wholesale Society, and the establishment of its Scottish equivalent five years later. Both wholesales were secondary co-operatives—that is, co-operatives whose members consisted of the hundreds of local co-operative societies that were springing into existence across Britain from the mid-1840s onwards. By 1900, there were 1,400 such local societies across the country, most of them members of one of the wholesales, furnishing the latter, through membership subscriptions, with a formidable capital resource with which to finance their operations. The creation of the wholesales was in direct response to fears among local societies that private shopkeepers were pressuring wholesalers to either refuse to sell to co-operative societies or to treat them as second-class customers in terms of price and quality. Thus, for the societies, the question of supply chains became a very real and pressing issue in the 1850s. The very creation of the wholesale societies indicated that from a very early period, the exercise of some measure of control over supply chains was at the heart of the British consumer co-operative movement. It will become clear that pressures both external and internal to the movement compelled the wholesales not only to become producers of commodities for sale to the societies but also to reach across the world to procure the widening range of global produce increasingly desired and required by working-class British households from the mid-nineteenth century onwards. Controlling supply chains was ‘hard-wired’ into the movement from its earliest days by necessity, circumstance and organisation. While the rest of this book will explore in detail the ways in which the wholesales developed strategies to maximise overseas supplies—and how the networks they created ultimately unravelled after the Second World War—this chapter will first examine both the rise of consumer co-operation in Britain and the national and global context in which the movement emerged and flourished.

II

The establishment of the Rochdale Society of Equitable Pioneers in 1844 is popularly seen as the beginning of the modern British consumer co-operative movement. A group of weavers, cotton operatives and others—many with a background in political activism either in the co-operative movement or Chartism—formed a co-operative store to sell food to its members in response to the poverty and inadequate access to cheap and wholesome food that characterised many British industrial towns in the ‘Hungry Forties’. The long walk to and from Manchester to stock the tiny candle-lit Toad Lane store with basic provisions (principally flour) a few days before Christmas has become the stuff of legend within the British co-operative movement. It throws into dramatic relief the subsequent growth in membership, wealth and commercial activity of the Pioneers Society and the rapid spread of co-operative societies on the Rochdale model across the UK in the following decades. But it is important to recognise that Rochdale represented a stage in the development of co-operative organisation that built upon a longer history of co-operative experiment in Britain, albeit the first to create the most sustainable model to date. To grasp why co-operation emerged as such an attractive and powerful movement in nineteenth-century Britain, it is important to review the unprecedented social and economic changes wrought by industrialisation.

From the latter half of the eighteenth century, Britain experienced change on a scale and at a speed never witnessed before. New technologies in agriculture prompted the widespread enclosure of land, and with it a reduction in demand for agricultural labour as well as the loss of common land available to the very poorest. Thus began a shift in population from the countryside to towns and cities, where new employment opportunities were emerging in the factories of the industrial revolution. Inevitably, this was an uneven, disruptive and frequently chaotic process. The demand for labour in new industries such as cotton in the north of England was often sporadic, as the early industrial economy was subject to periodic slumps, widespread lay-offs and bankruptcies. During the first half of the nineteenth century, it was not uncommon for urban workers to find themselves unemployed and destitute during economic downturns. The notorious 1834 Poor Law Amendment Act introduced a punitive regime for those without employment or income, with the dreaded workhouse the final port of call for the very desperate. Urban living conditions were also hazardous. Poorly built housing, bad sanitation, pollution and overcrowding made many towns and cities notorious for ill health and disease. Cholera, caused by infected water supplies, killed thousands in several epidemics that swept through Britain in the first half of the nineteenth century. It was not until major local government investment in public sanitation later in the century that such problems abated. In the countryside, reduced demand for labour and a hardening of attitudes by the landed elite also produced hardship for the very poor. Increasingly, landowners came to view their property as capital assets to be worked as efficiently as possible for the market. In the process, traditional social relations between social groups began to break down. The eminent historian E.P. Thompson described the ‘Moral Economy’ of pre-industrial rural life, in which the lowest ranks of society accepted the existing order in exchange for paternalistic regard by the landed elite. This meant that there were socially acceptable limits when it came to the pricing of essentials such as bread.¹⁰ But Thompson shows that with the increased monetisation of transactions in...