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Recovering Our Roots:
Mutualism, Mutuals and the ALP

Paper delivered by the Hon. Dr. Race Mathews at the Australian Fabian Society/Pluto Press Conference "Unchain My Mind: New Social-Democratic Ideas for Labor in Government",
Melbourne, 27 July, 2000.
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A Blue Print for Reconstruction

The poet John Donne wrote famously that "No man is an island, entire of itself". No more can the Australian Labor Party afford to be an island, disconnected, other than at elections, from the society it aspires to govern. Reversing Australia's current predicament - the tyranny of greed, the hollowing out of community and the growth of inequality - requires more than winning elections alone can deliver. Election victories are a necessary but not a sufficient pre-requisite for social reconstruction.

Mao-Tse Tung likened his guerilla fighters to fish swimming in, and nurtured by, the waters of supportive communities and populations. The ALP likewise needs active, informed communities and a strong trade union movement to sustain and enlarge it. What Australia's predicament requires of the ALP is a blue-print for social reconstruction and community renewal by the party, in partnership with unions and other community groups which share its concerns, values and principles. It requires a strategy for the reinvigoration of active citizenship and civil society. It requires empowering ordinary people and communities to be masters of their own destinies.

Not least, it requires that the ALP itself should be re-invented and re-invigorated. The party cannot afford to continue being reduced in membership to the dimensions of a sect - a sect comprised, moreover, of proliferating sub-sects, whose disputes are less with the party's external competitors than with one another. The problem is, in part, one of having privileged political numeracy at the expense of political literacy. It is also one of massive institutional amnesia. There is an urgent need for a recovery by the party of its institutional memory - for a re-discovery of the sources of Labor's commitment and passion which Ben Chifley characterised so memorably as our "light on the hill".


The Labour Movement is sometimes said to have stemmed more from Methodism than from Marx. In reality, Labour owes less to either Methodism or Marx than to Robert Owen. Owen endowed the early Labour Movement with a guiding philosophy - a philosophy which energised and inspired its adherents, and enabled them to overcome immense obstacles and, at a later date, gave rise to the Labor Party. Its name was mutualism. 1

The founders of the Labour Movement - driven as for the most part they had been from the land by the enclosures and clearances, and reduced in the new industrial towns to extremes of poverty, destitution and degradation such as are today all but unimaginable - embraced mutualism as an alternative to the rampant free market capitalism of their day. Mutualism was expressive of the fundamental Labour Movement truth, that more by far can be achieved by working together for common objectives than in isolation from one another. It was encapsulated in that greatest of all Labour Movement rallying cries "one for all and all for one".

Practical, hands-on mutualism became the means whereby the oppressed and excluded - in Franz Fanon's stark phrase "the wretched of the earth" - obtained through self-help the necessities of life which otherwise would have been unavailable or higher priced. For example, the Rochdale Pioneers - the twenty-eight poor cotton weavers who established their co-operative store in Rochdale near Manchester in 1844 - were responding to an urgent community need for affordable household requisites such as food and fuel.

Credit co-operatives were a response to the need for affordable carry-on loans for smallholder farmers and later for affordable household credit. Friendly societies were initially a response to the need for funeral benefits, and, later, for unemployment benefits, sickness benefits and medical and hospital care. Access to affordable life assurance was offered by mutual life assurance societies, as was access to affordable home loans by building societies.

Agricultural processing and marketing co-operatives met a pressing need on the part of farmers to capture value added to their produce beyond the farm gate. Worker co-operatives responded to the need on the part of workers for secure employment by enabling them to own their workplaces and jobs. Trade unions were originally mutualist bodies or co-operatives formed by employees in response to a pressing need to obtain better working conditions and a just price for their labour.

State Socialism

Side by side with the creation of these great mutualist institutions, mutualism also gave rise to new political philosophies. Gripped as Labour's pioneers found themselves by an intense revulsion and agony of conscience over the persistence of poverty, deprivation and inequality in the presence of wealth and abundance, they were not afraid to challenge politically the shibboleths and sacred cows of unfettered competition and free market ideology.

Nor were they afraid to think radically about the remedies. Mutualism was a rich source of perceived new possibilities for overcoming entrenched inequities and injustices. What key schools of reformist thought had in common was, in the words of the great Polish social-democratic philosopher, Leszak Kolakowski, "... an obstinate will to erode by inches the conditions which produce avoidable suffering, oppression, wars, racial and national greed and vindictive envy".

The issue which divided the reformers most fundamentally was whether, as many on honourable grounds concluded, the suffering of the dispossessed could not be relieved more rapidly and with greatest certainty through state socialism - through socialism on the model of the command economy and the statutory corporation? Or could not change be effective only if it was from the bottom up? If the state socialist model has proved to be flawed - if its performance has fallen tragically short of its promise - that in no way makes less admirable the selfless dedication to the advancement of the dispossessed which so largely motivated its advocates.

It as much honours the motives of the state socialists as it acknowledges their failure, to now address the new question of whether, as Francis Fukuyama so famously suggests, we are not now at the end of history, and neo-liberalist capitalism - whether the rampant free market economy is not now the only game in town? Or are there not also older reformist traditions centreing on mutualist, associative, and communitarian thought, which state socialism in its day overshadowed? Should not this rich reformist inheritance now be re-visited, re-assessed and re-claimed?

Mutualist Bodies

Examples of what mutualism can achieve are readily available. Demutualised as have been almost all Australia's mutual insurance societies and all but twenty percent of our building societies - looted as have been these entities by predatory demutualisers of capital in excess of $25 billion and assets under management of more than $150 billion - our remaining mutuals retain even today the loyalty of millions of members and the custody of billions of dollars of community capital.

For example, three million Australians - one in every six of our population - have credit union accounts. Our credit unions have assets totalling more than $21 billion. What might not these great repositories of community good will and capital now achieve if our credit unions were now to re-invent themselves - if they were to respond as effectively to current needs, such as for affordable rental accommodation and regional economic development and job creation, as previously they responded to the need for affordable consumer finance? 2

What might not be achieved were our credit unions to follow overseas examples of mutualist re-invention such as the great complex of industrial, retail, financial, service and support co-operatives at Mondragon in the Basque region of Spain - co-operatives which have developed from a standing start in 1956 into what is today Spain's ninth largest business groups with jobs for 42,500 workers and annual sales of $A10 billion? Such as the second Mondragon which we now see growing rapidly around Valencia in Catalonia? Such as the great Desjardins credit union Federation in Canada?

Do not Holland's Rabobank, Britain's Co-operative Bank and the co-operative agricultural banks of Germany and Austria likewise comprehensively contradict the slur that mutualist financial intermediaries have larger problems, or are less likely to succeed, than their conventional counterparts?

Nor is the capacity of mutuals of other kinds for re-invention less plain. For example, a notable American co-operative - Co-operative Services Inc of Detroit in Michigan - was established in the late 1930s, in response to a pressing local need for affordable, hygienic home milk deliveries.

When the corporate dairies moved into the market with a comparable product at a comparable price, the co-operative re-invented itself so that the community capital it had accumulated was applied to meeting the need for affordable optometrical testing and the supply of spectacles.

When this function in turn was taken up by the optometrical services corporations - the OPSMs of the world - a further re-invention of the co-operative took place. The co-operative at this point re-tasked itself to meet a pressing need for affordable accommodation and support services for older people It now operates some 4000 apartments in twenty-five housing co-operatives spread out from Massachusetts to California, with more being developed. Each co-operative is now an autonomous entity in its own right, within the overarching structure of the parent body.

An example closer to home is the Foresters-ANA Friendly Society in Queensland. What was originally the Australian Natives' Association (ANA) Friendly Society - a federal body with branches in every state and territory - was established in Victoria in 1871. When, in 1990, the federal body amalgamated with the Manchester United friendly society as primarily a funds management business, the Queensland branch opted to retain its independence. It then re-invented itself to deliver a comprehensive range of services for predominantly low income and otherwise marginalised households and communities.

Services currently offered include community capital formation, micro finance, savings and loans circles, a funeral fund, an eco fund, a community organisations investment fund, an ethical bond, ethical superannuation and a charitable trust. Subsequently, in 1999, there was a merger with the Foresters Friendly Society - originally established in Queensland in 1855 - to form the Foresters-ANA Friendly Society. The net worth of the society has increased since 1990, from $750,000 to $6 million.

ALP Incomprehension

What then has been the response of the ALP, to these fragile intimations of a resurgent mutualism? Unhappily to date the record has been one of incomprehension, indifference and obstruction. Panic consequent on the collapse of a bogus mutual - the so-called Pyramid Building Society - in the early 1990s prompted the mainly Labor governments of the day to enact financial institutions legislation which has for all practical purposes blocked the further development of financial mutuals.

Subsequent to the enactment of the financial institutions legislation, all but three of innumerable attempts to create new credit unions have been unsuccessful. Instead, communities deserted by the major banks have been forced to resort to the second-best expedient of establishing community banks - shareholder-owned businesses - in association with the Bendigo Bank. It may well be asked what will become of the community banks when, as is highly likely, the Bendigo Bank is taken over by one of its major competitors?

The financial institutions legislation has also resulted in smaller credit unions merging with larger ones, so reducing their local accountability and making them the more vulnerable to ultimate demutualisation. Nor have friendly societies been immune to the consequences of over-regulation. For example, the Foresters ANA Friendly Society must report as often in some instances as quarterly, to no fewer than three commonwealth agencies: namely, the Insurance Commissioner, the Securities and Investments Commission and the Prudential Regulations Authority.

As a spokesman for the society has stated recently, "The additional cost burden this implies, as well as the many hours of additional paper work involved, makes it difficult for small societies to even survive, let alone flourish". At the same time as governments, including Labor governments, have been imposing these crushing regulatory burdens on financial mutuals, they have also been abolishing or hollowing out the development sections of state registries of co-operatives which previously facilitated the establishment of mutuals of other kinds.

What Is To Be Done?

What all this reflects is a monumental failure to grasp imaginatively the outstanding performance of mutuals such as Mondragon and Desjardins - to grasp the immense power and potential of the mutualist idea. It is time now to remedy the omission. The ALP federal conference should now incorporate in the party platform an explicit commitment to mutualism - a new charter for mutualism and mutuals.

In the first instance, the charter should acknowledge and celebrate the mutualist difference - how mutuals differ from shareholder-owned businesses. As Mark Sibree of the leading friendly society, Australian Unity sees the society's relationship with its members: "We are not in a position to rip them off; there's no purpose. The same people who are our customers can turn up at the annual general meeting and vote". In the words of a leading British insurance mutual executive: "There is a difference between a business run for the benefit of policy holders and a business run for the benefit of shareholders. You put a different person first".

Secondly, the charter should explicitly acknowledge the need for governments to get out of the way of mutuals, get off their backs and allow them to carry on their work on behalf of the community with the least possible interference. This means - for example - getting rid as much as possible of the statutory and regulatory requirements which are blocking the establishment of new credit unions, cramping the development of current credit unions or inhibiting them from striking out in new directions in response to new needs.

It involves, among other things, recognising that one size does not fit all, and smaller credit unions and other mutuals differ in their regulatory requirements from larger ones. It involves striking off such legislative and regulatory shackles as might impede or discourage Australia's credit unions and other mutuals from involving themselves in local and regional economic development and job creation along lines similar to their Desjardins and Mondragon counterparts.

Third, legislation is needed urgently in order to protect mutuals against demutualisation, as much from within - as witness the recent NRMA Insurance experience 3 - as by external predators. Ideally, legislation would be expressive of the fundamental characteristic of all mutuals including credit unions, namely, that each generation of their members adds to their assets in the expectation that they will be retained for the benefit of others still to come - that current members are trustees in effect for the intentions of the dead and the inheritance of the unborn.

At the very least, there should be statutory safeguards against perverse incentives to demutualisation. For example, recent Canadian legislation requires that directors, managers and staff of demutualising mutual assurance societies should not receive benefits other than those available to all policy-holders. Ideally, a definition of benefits for the purposes of the legislation would include overall remuneration increases (including stock option allocations) accruing to directors and senior managers for - say - a five-year period following any demutualisation. Ideally, Australia would adopt legislation on the Spanish model, which requires that, where co-operatives are wound up, their assets must be a paid to a revolving fund for expanding the activities of current co-operatives or establishing new ones.

Meanwhile, pending proper statutory safeguards, mutuals should be encouraged to adopt rule changes to guard themselves against demutualisation, such as have been adopted by some building societies in Britain. These societies now require, as a condition of admission, an undertaking from new members that any windfall gains to which they may become entitled consequent on a demutualisation will be paid to an agreed charity.

Fourth, there should be national co-operatives legislation, such as would enable co-operatives - among other things - to trade freely across state boundaries. Fifth - and finally - the development sections of the state registries of co-operatives should be re-established and their resourcing restored, until the movement is again strong enough to resume responsibility for its own development.


Research by Robert Putnam in Italy has demonstrated how civic engagement such as through mutuals lifts both economic productivity and social well-being. Similarly, as noted by Fukuyama, "Just as liberal democracy works best as a political system when its individualism is moderated by public spirit, so too is capitalism facilitated when its individualism is balanced by a readiness to associate." Failing all this - failing action to avert a death of community as exemplified by mutuals and mutualism - may it not came to be said of the ALP and its aspirations, as John Donne also wrote, "Ask not for whom the bell tolls, it tolls for thee"?

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About the Author

Race Mathews is a Senior Research Fellow in the International Centre for Management in Government at the Monash-Mt Eliza School of Business and Government, and a former board member and chairman of the Waverley Credit Union Co-operative Ltd. He was previously a federal MP, a state MP and minister, a municipal councillor and chief of staff to Gough Whitlam as Leader of the Opposition 1967-72. His Australia's First Fabians: Middle-Class Radicals, Labour Activists and the Early Labour Movement was published by Cambridge University Press in 1994, and his Jobs of Our Own: Building a Stakeholder Society in 1999 by Pluto Press (Australia) and Comerford and Miller (UK). His E-mail address is

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