How the Gutenberg press helped Switzerland to become the pioneer of ‘inclusive capitalism’, and why poor Sophia Tolstoy needed a post-Gutenberg blog of her own

Muenster in early evening light -- around 4 pm -- Cheryll Barron

View from Bern Muenster Cheryll Barron postgutenberg[at]gmail.com

– photographs: postgutenberg[at]gmail.com

A clarification. Our use of ‘inclusive capitalism’ is neither fuzzy nor subversive – as in the accusation levelled at the organisers of a conference on the topic in London last May. For us, it describes cooperatives of various sorts, more or less the range set out in a 2009 report by Co-operative Development Scotland. Scroll down this post to see why one subject of that study, Switzerland, is proof that man as a consensus-building, egalitarian animal can be wildly successful.

Nothing drills the facts about Switzerland’s revolt against the corrupt old Catholic Church into you — your very bones — quite like mulling over them as you climb the 254 sub-arctic, twisting stairs to the bell tower of the Bern Muenster in mid-winter. From the viewing balcony up there, eyes unglued with difficulty from the hypnotic, turquoise River Aare below stray to the stone terrace at the cathedral’s base, where, during the Reformation of the 1500s, rebels had a merry old time smashing priceless religious images and objects.

This battleground in the Swiss capital is an unequalled symbol of the fight against inequality: the hulking Gothic structure on which construction began in 1421 loomed above a mere 5,000 inhabitants of Bern, at the time. All the better to intimidate them — only that assumption proved a mistake. In the words of an English-speaking specialist in the culture and history of Switzerland – an underpopulated species we care about for reasons to be explained in future posts – ‘much of Swiss history derives its interest from a revolt … of peasants against abbeys, … of towns against the ecclesiastical foundations from which they sprang.’

Switzerland’s continuing refinement of practical egalitarianism in the centuries-long wake of the Reformation means that there is a great feeling of been-there-done-that for anyone Swiss coming across a Twitter-trending lexical combination: inclusive capitalism — spotlighted in a speech earlier this year by the International Monetary Fund’s leader, Christine Lagarde. The Alpine republic most famous for political neutrality, charming quaintness and its tourist attractions, arguably deserves to be better known for its vast experience of using cooperatives as tools for wearing down social inequality. You might almost say that the whole of Switzerland – a country that has never had kings or queens, and is run not by any single leader but a Federal Council – works like a giant co-op.

Most elements of inclusive capitalism listed in a PBS – public-service broadcasting – programme in the U.S. a year ago, ‘The Alternative American Dream,’ are old hat for, and well-used by, the Swiss: ‘consumer ownership, credit unions and ownership by franchisees pursuing common purchasing efforts …’. Earlier entries on this blog have pointed to stable, cautious and solidly-grounded Swiss banking cooperatives avoiding the disastrous subprime mortgage crisis, and praised Swiss super-democracy.

Can the Swiss economy be said to have been injured in any way by excessive idealism? Quite the contrary. Cooperatives are democratic, not socialist. Socialism – as the Cambridge historian-of-ideas Gareth Stedman Jones has observed, was in part an attempt to replace the Catholic Church with a state religion. Most Swiss, a supremely praktisch people, have more down-to-earth aspirations. Last September, for the fifth year in a row, Switzerland was the world’s most competitive economy — leading the World Economic Forum’s global competitiveness ranking based on its vetting of ‘the set of institutions, policies, and factors that determine the level of productivity of a country’.

And its record for inventiveness? Last month, for the fourth year in a row, it was also the country at the top of the Global Innovation Index – ranking economies by their capacity to marry ideas to knowledge for creativity with social and economic value.

What connects such success with putting idealism into practice to Bern’s Muenster — and the chief preoccupation of this blog — is the media revolution on which the Reformation rode. Printing centres, most notably in Basel, were established early, in Switzerland, and became critical to marshalling and disseminating the anti-clerical, anti-Vatican arguments and facts.

Forcing change on the Catholic Church in the prelude to the Renaissance would seem dustily irrelevant, to members of the chattering classes in our time. Practically none of us have been constrained by the dictates of religious authorities: most of us grew up as the children of agnostics, atheists or doubting semi-believers. But smashing medieval religious authorities’ outrageously unequal information-power with new technology – in the shape of the Gutenberg printing presses – resonates loudly, in the midst of our digital revolution. Print broke the power of sermons, just as the internet and e-publishing are vaporising the power of print’s gatekeepers today. It was from preaching that most people, who could not read, gleaned authoritative information about the world.

A report on a conference of medieval sermon scholars at Harvard two years ago sets out the remarkable parallels – including doomed attempts to discredit the unmediated broadcast of information, as in old media propaganda, now, about blogs and blogging:

… It was the ecclesiastical system behind sermons “that invented the idea [that] there was a universal body of knowledge” and that led the way to modern universities. Sermons were the dominant literary form in the Middle Ages. They bridged the emerging power of the written word and what was, 900 years ago, the predominance of the spoken.

… Before the printing press, knowledge was disseminated through oral traditions. In the public sphere that meant sermons. These discourses from the pulpit were the Internet and the mainstream press and the propaganda machine of the Middle Ages.

… At the same time, sermons of nearly a millennium ago prompted a very modern question: Who has the right to speak? Vying with priests for the right to preach were lay people, lawyers, kings, and public officials. In a bit of recurrent culture shock, even women demanded the right to preach sermons.

Most of all, the prospect of lay preaching “was an anxiety for the Church,” wrote Carolyn Muessig in a study of medieval preaching and society. (The University of Bristol scholar delivered the first paper at the Harvard conference.) The concern, she wrote, was the Vatican’s desire to protect people from heresy and “to preserve a clerical monopoly on learning.”

The debate over who owned the medieval airwaves went on for hundreds of years. As late as the 14th century, one critic still held that the Vatican had the final say. “No lay person can preach without authorization,” wrote Robert de Basevorn, “and no woman ever.”

… In an internet break from reflections on that old battle, news of a book published by Yale University Press surfed onscreen, this week. More than twelve decades after a brutal misuse of power by her husband, Leo Tolstoy, his wife Sophia Andreevna has got her revenge. It seems that the author of War and Peace wrote a spiteful, vicious tale about his own domestic wars in an 1889 novella, The Kreutzer Sonata. Everyone in literary Russia, and lofty beings outside it – including Tsar Alexander III – knew that the old philanderer’s story about a jealous husband who murders his wife was intended as punishment for Sophia’s infatuation with a musician who filled the void left by the romantic hopes and expectations that Tolstoy’s behaviour wrecked.

The aggression in the novelist’s self-pitying tale was not lost on the tsar, who sympathised with Sophia. In one phase of the drama, this writer’s wife demonstrated exceptional nobility of character in pleading with the ruler to order government censors bent on suppressing The Kreutzer Sonata to lay off – even though she was profoundly hurt by it.

She found her own way to fight back – in two novellas telling her side of the story that languished in deepest obscurity in Tolstoy’s archives until they were published in 21st-century Russia. Now, Yale has had them translated into English, in The Kreutzer Sonata Variations, a collection that includes, along with extracts from her letters and diaries – more amazingly yet – a story by the Tolstoys’ son Lev that is also a protest against Kreutzer.

We have had to wait much too long for these remarkable discoveries. Sophia Andreevna had to make a special journey to St. Petersburg to plead her husband’s case with the tsar. Now, if she had only had a blog …

A triumph for cooperatives: customer-owned Swiss banks are thriving while their shareholder-owned rivals lick their wounds in disgrace

Though the Swiss seem to have a special knack for running cooperatives, there is new interest in this form of organisation in communities all over the world. Photograph by Amita Chatterjee

Everyone writing off cooperatives as impractical — or as artefacts of misguided ‘hippie’ idealism — will please read the article below, re-published with the permission of Swissinfo.ch, a section of Switzerland’s equivalent of the BBC.

The Swiss see cooperatives as building blocks of democracy. They are rightly proud of their own ‘extreme’ or ‘direct’ democracy — the subject of an earlier post here – based on the rigorous implementation of proportional representation, and are apt to shake their heads despairingly about the ‘winner-takes-all’ version of the system of government in other western democracies.

The Economist — which has a habit of sniffily referring to cooperative banks as ‘dull but safe’ – has cited two authorities confirming the wisdom of coops:

A 2009 study by the Bundesbank, Germany’s central bank, into the connection between financial stability and bank ownership also found that co-operative banks were much less likely to fail than those owned by private shareholders. That fits with earlier work done by staff at the IMF in 2007, who argued in a working paper that co-operative banks were more stable than their commercial counterparts.

23 March 2012 

Crisis gives new life to cooperative banks

 by Armando Mombelli, swissinfo.ch 

——————————————————————————–

Sometimes seen as an old-fashioned business model, cooperative banks have succeeded in strengthening their position since the crisis in the financial sector.

The three main cooperative banks in Switzerland – the Raiffeisen, Migros and Coop banks – have been enjoying strong growth in the past few years. 

“Until recent times, the banks had a stabilising effect on the economy. But in the past few years they have turned out to be a destabilising factor,” said Florian Wettstein, who teaches business ethics at St Gallen University. 

“Growing international competition and pressure from shareholders have led to a logic of short-term profit with very negative consequences,” said Wettstein. 

“We no longer talk about growth. What we want is bigger growth than last year’s or last quarter’s. At a certain point, this attempt defeats itself and we get speculative bubbles which burst sooner or later.” 

The last such speculative bubble that burst in 2008 threw the financial sector into crisis and forced many countries to exert huge efforts to save banks in difficulty. 

Even Switzerland was not spared: UBS, the number one Swiss bank, just missed going under thanks to massive intervention by the federal government and the country’s central bank. 

“It is interesting to note that Swiss banks, in particular UBS, were not just caught up in this trend. They played a very active role on the international scene, throwing their traditional culture of caution to the winds,” noted Wettstein. 

New management models 

The crisis in the financial sector spread to the “real” economy and it is still negatively impacting on growth around the world. Governments have been studying new models of management and regulation of banking to avoid another major financial crisis. 

Forbidding high-risk speculative ventures, separating investment banking from deposit management, limiting bonuses and various other measures have been examined by the Swiss government as well as others. 

Government and parliament here have approved an increase in equity capital requirements for banks, higher than those enforced by other European countries. This measure has still been regarded as insufficient by many experts. 

On the other hand, a business model that is sustainable and crisis-proof has existed for quite some time: it is the model of cooperative banks securely anchored in the local economy. 

Since 2008, Raiffeisen, Migros and Coop bank have attracted thousands of customers and billions of francs away from the “big two”, UBS and Credit Suisse, whose credibility nosedived after the losses they took on the American market. 

Last January, Raiffeisen almost completely took over Wegelin Bank, which had to shut down its activities when it found itself under investigation in the United States along with ten other Swiss banks accused of having helped thousands of American customers to evade taxes. 

In February, Raiffeisen became the first bank to guarantee transparent financing of political parties and indicate it was in favour of the introduction of automatic exchange of information on bank deposits with European countries. 

Several advantages 

In difficult times for the financial services industry, this cooperative bank is showing itself particularly dynamic and willing to break with taboos like banking secrecy which no longer seem to have much of a future. 

In the International Year of Cooperatives proclaimed by the UN, this fact may serve to renew interest in a business model often dismissed as old-fashioned – almost all the big cooperatives were founded more than half a century ago. 

“Cooperative banks actually offer several advantages,” said the economist Hans Kissling. 

 “The main one is that they are not exposed to pressure from owners or shareholders, and so they do not go for big risks and excesses. Rather they pursue a long-term strategy in the interest of their members, who are also their customers.” 

“Once shares are not involved, there is no danger of things like insider trading. Nor is there a danger of public takeover bids at their expense: attempted takeovers by other companies have to be approved by the members,” added Kissling, who is a former board member of a cooperative. 

“And last but not least, capital does not drain from the company through payments of  exorbitant dividends or salaries. It stays in the cooperative and gets used for new investments or to strengthen its equity.” 

Democracy and solidarity 

Tending as they do to democracy and solidarity, cooperatives almost always come out on top of the rankings for companies that enjoy the trust of the ordinary public. 

This has not in itself been enough to stimulate growth in the sector: every year thousands of limited companies are founded in Switzerland, but only a handful of cooperatives are set up. 

“The government should introduce tax breaks or create a special fund to promote the conversion of family businesses into cooperatives, for example on the death of the owner. Another option might be to introduce share certificates without the right to vote, which would encourage the capitalisation of cooperatives,” said Kissling. 

In the Swiss banking sector, most of the potential for this kind of development would come from the cantonal banks, which several cantons hope to privatise eventually. Conversion of these into cooperatives instead of limited companies would help safeguard their original mandate. 

In this way, almost half of the 20 principal Swiss banks could one day become cooperatives. 

“Promotion of cooperatives should above all be anchored in the constitution, as it is in Italy,” maintained Kissling. 

“This would not only serve to acknowledge the economic and social importance of cooperatives, but also to emphasise the long Swiss tradition of solidarity, which goes right back to the country’s roots.” 

He recalls that the Swiss Confederation is called in German “Eidgenossenschaft”, which literally means “a cooperative of sworn allies”. 

Armando Mombelli, swissinfo.ch

(Translated from Italian by Terence MacNamee)

[ Of course cooperatives — being creations of imperfect human beings — also have their flaws, and these are considered in a swissinfo.ch briefing on the topic. ]