Webinar Held on Monday, March 18th
Robin Murray is an economist whose work has recently focused on co-operative development and social innovation. He was author of ‘Co-operation in the Age of Google’ a report on strategy for Co-operatives UK (the umbrella body for co-operatives in Britain), a co-author of ‘The Open Book of Social Innovation’ and is currently working on a text on Co-operative Accumulation. He is a Fellow of the Young Foundation, for whom he co-authored two books on social innovation, and is also a visiting fellow at the London School of Economics.
This webinar will continue the discussion from BALTA’s recent webinar with Pat Conaty, which focused on how innovations develop and spread within the social economy.
Robin prefers not to use the word ‘scale’ because of its association with mass production, and finds it more helpful to think in terms of generative diffusion and the gradual development and strengthening of alternative systems. Pat discussed this process in the case of community land trusts, community finance, and local energy projects.
Robin will look at differing experiences in such fields as fair trade, community waste, social franchising, and co-operative banking, schools and social care. They suggest the significance of particular types of intermediaries and federated structures as means of expanding (and defending) these systems.
Presentation Slides: Click to download
Recording: Click to download
From scaling to complexity:
The theme of this series of webinars is the scaling and diffusion of the kind of alternatives have all been working on. In the previous webinar Pat Conaty discussed this in relation to Community Land Trusts, (CLTs), local energy systems and community finance. The question in each case was how these inspiring projects could become widespread. How the Micro could become the meso if not the macro. How one village could become 10,000 villages.
Sometimes – particularly among policy makers – this process is described as scaling. They ask of any project, or pilot, will it scale? Within civil economy movements, similar questions arise – and there are a number which have split on the subject, one group going for scale (because of its ‘greater impact’) even if it means reducing the qualitative difference of the alternative, another resisting the dilution of the idea that inspires the project.
Without going into these particular arguments – and it may be a question of both/and rather than either/or – I have felt uneasy with the notion of scale. It reflects the era of mass production which was dominated by the concept of scale. It implies replication, standardization, and power. It is a linear, mechanical concept. It suggests that the original idea or model that is scaled is the one, and involves those employed to do the scaling do so under the direction of the originators. It is an idea in the tradition of Frederick Winslow Taylor.
Capitalism itself has been moving on from this model of production into various forms of Post Fordism. These new forms recognize that knowledge cannot be centralized in a managerial core, that innovation needs to harvest ideas from wherever it can get them – workers, consumers, suppliers, and now the wider web. Yann Moulier Boutang calls this new era Cognitive Capitalism and sees the central contradiction of modern capitalism as the attempt to privately appropriate what is by its nature an intellectual commons. Let us return to this question of collective intelligence in a moment. Here it is enough to note that over the past thirty years capitalism has developed many techniques that go beyond the restrictive terms of mass production – variously termed flexible production, mass customisation, co-production and so on. It has moved beyond economies of scale to economies of scope and, as production becomes ever more complex and interdependent, to economies of system.
We need a different set of concepts to think about the expansion of alternative economic initiatives to those of scaling. Until now I have thought about it in terms of the idea of diffusion. Is this a useful Key Word? Does that describe a song that goes viral or a forest fire that spreads? Neither scaling or diffusion really fit. Are there other possibilities: propagation, dissemination, spreading, accumulation?
Mike Gismondi had some reservations about the notion of diffusion which is commonly used in the literature on technology. Much of the mainstream literature on technological innovation looks at the issue through a technological lens. It asks: What are the pathways by which a technology has spread? What are the barriers it faces? How do organizations grow and respond to innovations?
I want to go on from Mike’s hesitation and discuss whether we should focus less on the diffusion of a particular practice, and more on its evolution. This has some parallels to biological evolution but is a human and therefore an intentional process. It is a process of generating alternatives systems of practices and relationships, that evolve along multiple interconnected paths.
Contrast between the private and the social economy:
Intelligence is central to understanding such evolutionary processes in the social in contrast to the private economy. Information and knowledge circulate in quite different ways in these two economies. In a private economy is information is privatised and protected. It is diffused either as a commodity, or in support of other commodity packages. Its innovations are spread in many different ways – through corporate expansion, the sale of IP, franchising, service contracts, consultancies, joint ventures, technical support of the supply chain, or support services such as those provided by venture capital. Not all intelligence can be controlled and privatized, particularly tacit, non-codified knowledge. This is lodged in labor, and although there are attempts to restrict its diffusion by clauses in labour contracts, their effect is limited.
In the social economy the dynamics of spread are different. It is driven by social values and the pursuit of a shared mission rather than private market value.
We can see empirically that in the social economy there are all sorts of ways in which information and knowledge is ‘socialised’:
- Social franchising.
- Knowledge sharing: file sharing, online forums, etc.
- Open source: collaborative developments like Firefox and Wikipedia
- Barefoot consulting
- Propagating techniques, with ventures seeking to diffuse their knowledge and methods through workshops, manuals, visits, staff exchanges, and training courses (eco-building for example).
- Collective research and generation of information.
-  The Italian industrial districts exemplify this type of informational collaboration between small family firms and co-operatives, and there are similar intermediaries in fields such as organic food, sustainable energy and among co-operatives more generally. The recent growth of co-operative schools in the UK – there are now over 400 – has led to them setting up a second level co-operative to provide the advice and services formerly supplied by local authority education departments. All these consortia deal primarily with information and know-how.
There are different relations of knowledge in the social economy compared to the private economy. Social ventures of course keep some knowledge to themselves – there is commonly an institutional egoism as well as the need to sustain an organization financially. But the stronger the shared mission, the more marked the tendency to ‘socialise’ rather than privatize know how, to treat it as a common resource rather than a commodity.
This distinction highlights one of the limitations to the notion of diffusion. For as a concept it shares with scaling the focus on how particular types of knowledge circulate in an economy. It privileges that knowledge and traces the course of its spread. In doing so it looks at it as if it were a commodity even when it is circulating more freely in the social economy.
What if we think about the spread of this knowledge in evolutionary terms, in which it is an element in the complex interactions between multiple sources of creative growth. The knowledge will have an impact on such growth. But it will be subject to change as it circulates. Like a message it can be amplified, mashed, swamped, re-calibrated, and loop round. What becomes important is less the fate of a particular piece of knowledge, but the growth a system that can adequately respond, take up, add to, and enrich that and many other threads of knowledge. Instead of thinking mechanically in terms of the replication (or diffusion) of a particular idea or model, what this encourages us to think about are the processes and institutions that encourage the development of a generative alternative ecology.
Let me illustrate with three examples. The first is social franchising. In the past two years there has developed an EU backed social franchising network with 60+ social franchisers. Some of the franchises exemplify the linear model, others are more generative, as shown in the following diagram:
On the vertical axis there is the form of governance, running from the degree of restriction by the franchise originators, to the degree of inclusion or federation of the franchisees. The horizontal axis maps the extent to which the franchise is standardized or generative, that is the extent to which the terms of the franchise determine the precise mode of operation of the franchisee, or rather allow for the design of the service to be geared to the particular circumstances of the franchisee, and encourage innovation which can then be spread among other franchisees.
In the top left segment are successful social models of scaling from the fields of housing, recycling and organic food box distribution. The tensions of centralization and governance have been reflected in the controversy surrounding Freecycle’s legal pursuit of non franchised groups using the terms freecycle, in the face of opposition both by the groups concerned, and law professors and Wikipedia’s Jimmy Wales supporting free information. There was also a split between the US based franchisers and a score of UK franchisees because the latter had not been allowed to develop their own local variants of the service. Here is an instance of this common tension in civil economy movements between scalers and generators.
In the top right hand segment, control remains with the franchisers but the franchisees are given scope for their own variants (the inspiring Italian Le Mat hotels run by the disabled, or suffering from mental illness or drug addiction is one example; the UK Energy 4 All that acts as a hub for expanding wind energy is another).
In the bottom right segment, there is similar openness to local variation, but within a federal governance model. The English social care franchise CASA has hybrid model with franchisees having a share in the governance along with the founders. The Flemish re-use and energy saving franchise Komisie – the largest in Europe with a turnover of €28.5 million and 4,000 employees – was established and controlled by its members.
Here we have the start of the spectrum from linearity to complexity. At one end of the spectrum is a form of diffusion which is similar to a Macdonalds (or Taylorist) model. This is scaling. The second type of franchising moves along the spectrum towards greater complexity with its focus on the circulation of information within the emerging system. The franchiser supplies start up information economically as well as mentoring to new franchisees, and then encourages the sharing of knowledge within the agreed framework of the network.
The Basque country’s celebrated Mondragon co-operatives are a much more evolved example. They sprang from an educational programme, and like a tree, grew by sprouting out new branches. The first factory prompted others to start. When finance became an issue they started a bank. Then provision for insurance. The educational programme expanded along multiple paths. R&D centres were set up. Consultancy was later spun out from the bank as a separate co-operative. Each co-operative and intermediary has its own trajectory is still woven into the group through multiple threads.
Edgar Morin’s writing on complexity captures some aspects of Mondragon’s process of growth. Morin writes of the tension in any matter between the forces of order and the forces of growth and creativity. He gives the example of DNA as an example of order which shapes the forms of creative growth that result from the development of proteins. For Morin, order alone embodies the death force of entropy. Creativity alone implies chaos. The two have to find some kind of balance.
In the case of Mondagon, the central principles developed by Arizmendiarrieta and his collaborators still shape Mondragon’s growth – they are its DNA. But as a vital institution it has to develop in response to its internal dynamics as well as external threats and possibilities.
Mondragon has certainly grown over its 50+ years, from the half a dozen original co-operators to over 80,000 today. Neither the concepts of scaling or diffusion satisfactorily captures what has happened. While some of the enterprises in the group have expanded overseas this is not so much through a drive for the scaling or replication of the model , but rather as a pragmatic response to the pressure of costs. The focus remains first and foremost on sustaining the economy in their small region of origin.
Mondragon’s growth is better understood as expanding complexity. It is more complex than the generative social franchises. It growth is not limited by the terms and boundaries of the franchise. The elements in its system are more varied and developed, and the system itself is correspondingly more robust. It is much further along the spectrum away from the replicators.
There is a sense in which Mondragon’s central project and idea – its DNA – could be thought of as spreading. The more general project or ‘aesthetic’ being to an extent parallel to the much thinner idea embodied in the franchise. But we would lose a lot if we saw this merely as the diffusion of Arizmendiarrieta’s concept, rather than looking at its development as an emerging system.
Both the franchising and Mondragon examples could be mapped as a family tree, that traces all the descendents of a model or aesthetic to its source. My third example, fair trade, is better thought of as an inverted family tree, that traces its dominant forms to multiple sources. If we look at how fair trade has grown (and it now accounts for some $6 billion world wide) it has not come about through a centrifugal scaling of a model, but through a centripetal attraction of enterprises each with their own identities but agreeing to operate according to a set of certain common rules. These rules are Morin’s DNA. The question for the rule makers (the Fairtrade Labelling Organisations) has been how to develop and retain the concept’s attraction.
Fair trade started as a range of initiatives that were in essence solidarity trade. They were initiatives that responded to immediate opportunities for supporting marginalized countries and communities in the South. In some cases the initiative was driven through co-operative shops and box schemes. They made links to small farmers and their co-operatives and imported their products (CTM with its 500 shops in Italy and Altertrade in Japan are inspiring examples).
In other cases, like Twin Trading in the UK, the impetus came from progressive governments and small farmers. Twin Trading arranged for the import and sale of the products, and initially sourced supplies in the North on behalf of the Southern producers. What developed over time was an alternative supply chain:
- 1st level producer co-op
- 2nd level producer co-op
- 3rd level producer co-op
- Importing & shipping
- Processing Sales and branding
- International producer co-ops
- International ATO partnerships
As Twin Trading grew it decided to focus on sales and branding because this was where the great surpluses were concentrated. Since quality was paramount for a brand, it then had to provide all sorts of quality support to the farmers, particularly to 1st level producers.
The growth of any of these pioneers could be analysed like Mondragon. They had an aesthetic, and realized it pragmatically. One thing led to another. New branches sprouted and grew with their own character. Cocoa farmers in Ghana heard about the coffee farmers in Mexico. Could they start a brand? But they were unorganized. So they formed their own coop, started with 1,000 farmers, and experimented with exporting through Twin Trading. Within 5 years, they had developed a reliable supply chain. Their numbers had grown to 45,000 cocoa farmers in 1200 villages societies. The Divine brand was launched.
In each of these cases, there was no clear idea of what might develop in the long term. Many paths were explored. Many did not take off. But a few did, and developed their own internal momentum. They were like separate streams, with limited connections. They grew, but modestly. Each product traded generated its own life force. Unlike Mondragon this was a loose system, where networks grew organically, and often contingently. There was not a single node that was scaled or diffused. Rather there were multiple point of growth. Central and South American co-ops revived and diversified. African co-ops were pruned and restored. They began to organize themselves by continent and internationally. The many tributaries formed a deltas rather than a river.
There was another different force – the fair trade mark. It has been the mark that has led to fair trade’s explosive growth into the billions. The mark was an intervention in the economy of attention. We could describe it as a way of scaling or diffusing a model of alternative trade (and there have been sections of the fair trade movement that have done so). But the challenge to those in the fair trade labelling organisations (as in the organic food labeling organisations) has been to go beyond that way of thinking, and consider how to strengthen the kind of complex, multi-nodal creativity which is the necessary gold behind the credit of a mark.
Fair trade is a multi-faceted movement, which is caught by a tension between different points of the scale/complexity spectrum.
I am suggesting that if we want to expand the social economy as an alternative form of economic relationships, then we need to think in terms of an intentional ecology. It is a generative system where innovation is distributed not centralized, where it is differentiated not standardized, which is open not closed, where there are channels for freely circulating ideas and information, and the means for the collaborative development of specialized services. We could call this growth ‘ecological accumulation’.
Practically this would encourage a project to grow not through widening (by replication) but deepening, growing itself organically. At the same time, as an open organization, it needs to expand its network with others that are following a similar path, and/or establish institutions that encourage the spawning of similar, autonomous ‘points of initiative’. These are the living cells, each with its own force of attraction and growth.
We are leaving the world of codified models and seeing what is being created as threads of an ever more diverse, richer and complex set of networks.
Circuits, processes and institutions.
What binds together this kind of emerging system? What processes and institutions contribute to the expansion and enrichment of such ecologies?
There are three key intermediaries which evolved as part of Mondragon’s growth:
i) formacion. ‘Formation’, the term used in romance languages for education and training, is wider and more inclusive than the English terms. ‘Formation’ involves the development of character and outlook (like the German’ bildung’) as well as skills. Both the military and the church recognize the centrality of such ‘formation’ for the development of organisations that necessarily have to devolve measures of autonomy to the front line.
It is not by chance that the priest Arizmendiarrieta placed primary emphasis in the establishment and growth of Mondragon on ‘formacion’. The early training school has over the years become the Mondragon University, taking forward a tradition that has resisted the split between culture and technique. Indeed Arizmendiarrieta once described Mondragon not as an economic project with a strong educational component but an educational project with a strong economic dimension.
Other successful social economic projects have developed schools, academies, universities and training colleges at their core (the Slow Food movement has its own university, so does the bio-dynamic ‘oasis in the desert’ Sekem in Egypt; the Barefoot College movement in India is another example, or the Everdale Farm in Ontario which is conceived as a project to form the next generation of organic farmers in the province). Those that have not done so – and here the fair trade movement stands out, as does the community recycling/Zero Waste movement – have been weakened as a result.
ii) finance. The growth of Mondragon was fuelled by the remarkable ‘closed loop’ finance channeled through its bank, the Caja Laboral, established in 1959. The co-operatives and their members banked their savings with the Caja, which in turn re-invested them in the development of new co-ops and the expansion of old ones, as well as providing traditional banking (and pension) services to members and their families.
For its first three decades the Caja was a development bank, with a section devoted to the preparation and mentoring of new co-operatives. In this sense it was an extension of the principle of ‘formacion’ . It recognized, as few of the many hundred development banks established in the past 50 years have done, that financing is the straightforward part of banking. The deeper challenge is the preparation and shaping of the project. It is projects and people rather than finance which is so often the constraint in the expansion of the a social economy.
Such local ‘closed loop’ financial systems have been at the core of the success of the Germany, Austrian, Italian and Dutch local economies (principally through co-operative and municipal banks) although all have found it difficult to maintain a rate of local investment that keeps up with the supply of savings. As a result there has been leakage from localities (eventually onto international money markets).
iii) means for generating and circulating information. If we start from the proposition that the social economy has a decisive advantage over the private economy in generating and socializing information rather than treating it as a commodity, then ensuring that this potential is realized becomes central to the growth and resilience of a new system.
The ICT revolution has transformed the means for socializing intelligence. There has been an upsurge in the last decade not just in open source projects, but crowd sourcing of ideas, social innovation camps, collaborative project development and so on. It has allowed institutions to develop their own systems of managing information internally and externally and their multiple channels of communication.
Mondragon has developed a sophisticated information system, organized through the bank. One of the conditions of a loan is that the co-operative borrower submits monthly accounts in a specified format to the bank (which is governed by those it lends to as well as by its workers). Through this monitoring the bank is able to pre-empt difficulties and in extreme cases take over the running of a co-op until it is back on its feet at which point it is handed back to its workers. There are common standards and guidelines which help integrate a large number of autonomous enterprises.
Civil economic ventures tend to be less integrated. They have their own finance and accounting staff and systems, while the external control and guidance mechanisms are exercised by conventional banks rather than a supportive (and accountable) one like the Caja Laboral. This is certainly the case in fair trade. They have limited and fragmented information systems, and have much to learn from the way the most innovative private firms ‘socialise’ information within themselves.
There are many other knowledge and informational strands of intentional ecology systems, some of which I mentioned above.
- Web platforms and tools
- Communities of practice
- Workshops and seminars
- Collaboratives for the gathering of information
- Events and celebrations
Once production starts, and social ventures are launched into the great competitive sea, these can be sidelined within a venture let alone at the level of a movement. Yet for the kind of development I am talking about they need to develop beyond the informal and contingent. There is enormous social wealth that can be catalysed through social economy projects.
As living organisms grow, their cells sub-divide rather than getting bigger. The reason is that the outside of the cell (the cell membrane) which transports the food and oxygen to the cell, reaches a point where it can’t keep up with the internal needs of the growing cell and so sub-divides. We could take this as a metaphor for organisations in the social economy. A healthy social economy needs to grow with cells that do not over expand but sub-divide and keep connected as they grow.
John Restakis in his book on Humanising the Economy describes such a cellular system as it operates in the Japanese food co-operatives. The primary unit or cell is made up of 5-10 households in a Han, and they remain connected together in great networks of 300,000 members and upwards. Historically, the British retail co-operative movement grew in this way. The local retail societies were reluctant to grow too big beyond their borders, rather helping other places to establish themselves, and remain connected through common purchasing and political and cultural ties. And this is the common pattern for co-operative movements in their growth phase – from 19th century banking to peasant farmer co-operatives in the South today.
The current Italian social co-ops are in their growth phase at this moment. They have adopted a particular method of using the knowledge and capacities of existing co-ops to inspire and promote new ones, referring to this as the principle of strawberry fields. An existing social co-op will help establish a new one, if that new co-op, once up and running, undertakes in turn to help set up a new one. Helped by this method, the number of Italian social co-ops have grown from 1800 in 1990 to 14,000 in 2012. 
A less formal way in which knowledge can be socialised and new ventures stimulated is through visiting. Site visits are a means of inspiration and sharing experience A successful project, with strong attraction, tends to draw in visitors. This is true of Mondragon, as it is of the Grameen Bank, of Bed Zed’s eco-housing, and the co-operative early years schools in Reggio Emilia. The trouble they all faced was that their ordinary daily activity was in danger of being swamped by visitors. The projects responded not by turning visitors away but by managing them.
The Reggio Emilia schools formalised this. They set up a separate co-op to organise the sharing of the schools’ experience. The co-op developed materials about the schools, created videos, published books, curated a travelling exhibition, organized offsite sessions with those involved in the schools (including parents). They arranged site visits, that were inspiring for the visitors, and also a chance for teachers and parents to meet the visitors and learn from them.
Formalising the process in this way encouraged the design of multiple ways of communicating. It used the techniques common now in modern museology.  And it generated its own revenue.
Looking back at Pat’s discussion in the last webinar, in many ways his examples illustrated the theme of this one. There are training sessions. There are sources of funds and support for the preparation of projects. None of these started out as a single example then being copied or franchised. Rather I read Pat’s examples as attempts to develop new cells (alongside some old ones) simultaneously. I would add only one thing to his exposition. He returns in his talk as in his book with Mike Lewis to the triad, land, labour and capital. We now need to add information and knowledge, not least because this is where the social economy has such a potential structural advantage.
If we look at our projects not just from within outwards but also from above as apart of a wider evolving system, then see that:
- We need to give as much attention to the outside as the inside in organizational development
- We need to study the processes and institutions that need to be developed within the industrial ecologies of the social economy
- We need to understand the critical role of information in it multiple forms as a means of synthesis between autonomous initiatives
- We need to be aware of the dangers of scaling too quickly, too early, and in ways that threaten the vitality of the cells.
Robin Murray, 16th April 2013.
 In Twin Trading’s case, all its new brands were developed with the help of a wide range of voluntary or low cost specialists and media. Yet the collective intelligence of all those involved in fair trade – as consumers, small shareholders, members, volunteers, staff and producers – is still scarcely tapped.
 Arizmendiarrieta encouraged the Mondragon co-operatives to sub-divide through spinning off specialist sections of their work so that they did not become too large to function as effective democracies.
 Would it not encourage the expansion of the social economy if all social ventures designed their workshops and offices as working museums in the sense of sites of shared knowledge and learning?