In the opening session of the International Summit of Cooperatives, delegates heard from one of the world’s leading economists on the role co-operation plays in economic life.
Professor Robert Shiller is a professor of economics at Yale University, and was awarded the Nobel Prize for Economics in 2013 for his work demonstrating inefficiencies within stock markets.
Prof Shiller began by referring to a new set of ideas that has taken hold in economics in recent years, ‘behavioural economics.’
“Economists like to present people as working only to consume, that we’re all selfish, that we want to eat a lot and be entertained” he said. Behavioural economics points out that this “doesn’t quite characterise individuals” who are also guided by empathy for others and social activity. This is important because he considers a “good society – a society in which we would want to live” – as one in which people have empathy and treat others as ends in themselves rather than just means to an end.
For Prof Shiller, achieving the good society is something that can only happen when people work together. “We cannot do much to achieve our deepest goals on our own” he says, pointing out that “one reason the human species is so dominant on this planet is because we’re so interrelated, we work together so well.”
As such, business and finance – which he sees as vehicles for enabling people to achieve their goals – are vital for bringing about the good society. “The problem with modern finance,” though, “is that it appears to be incompatible with the good society.”
For Prof Schiller, “the co-operative movement is one example” of how business and finance can be organised in a way that priorities people.
“The cooperative movement is an essential innovation on the path to the good society.”
However, he was also clear that co-operatives are not the only innovation. He discussed the “democratisation of finance” as a way to give people more control over, and access to, the financial structures that govern economic life.
This started in the nineteenth century with the establishment of a stock exchange, he said, and the creation of saving banks, among other things, and can be seen today in new innovations. He also cited the growing phenomenon of crowdfunding, through which individuals can invest in and support businesses without intermediary financial organisations. And he outlined the legislative model of the Benefit Corporation, which combines profit-making and public purpose, which he described as a “revolution in corporate law in the United States”.
“It dates back to 2010,” he said. “The first state was Maryland and it’s spreading like wildfire, and is now in 27 states.”
This discussion of how to democratise the financial sector was picked up by a number of senior representatives from the financial sector, including the chief economics editor at the Financial Times and the deputy director-general of the World Trade Organization.
They set out some of the major challenges facing the global economy, highlighting growing inequality, unemployment, extreme poverty and structural problems in the financial sector.
Within this context, Juan Buchenau, a senior financial specialist at the World Bank, highlighted the opportunities for co-operatives to give people control over their finances and work.
“We need to incorporate poorer people into the economy and I think that co-operatives have a central role to play,” he said, adding that “2.5 billion people worldwide do not make use of financial services – it’s a huge challenge. It’s also a huge market.
“We see in developing countries a huge energy of people setting up co-operatives to provide themselves with financial services . . . to get together to solve their problems. I see this as an opportunity for the co-operative sector.”
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