Are we really becoming less co-operative?

How do we nurture the values of the Co-op in a free market?

Co-operation. It is a nice word - the idea that people do things together, helping each other and thereby improving the lives of everyone. So different from competition, suggesting a fight for supremacy. You never hear of "cut-throat co-operation", do you?

But co-operation, as far as UK economic endeavour is concerned, is in rapid retreat. You can see that retreat this week in the battle for the Co-operative Wholesale Society, the sprawling business conglomerate that runs the Co-op supermarkets, the bank and (an inspiration for countless bad jokes) the funeral parlours. A young entrepreneur called Andrew Regan is trying to launch a pounds 1.2bn bid for the group. This has led to accusations of industrial espionage, payments to companies in the Cayman Islands, threats to call in the Serious Fraud Office and other excitements.

The bid may or may not succeed - it looks a bit flaky to me - but it would not be credible at all were it not for the Co-op's poor record. The bank does well, having cleverly used its non-mainstream status to attract customers sensitive to ethical issues. In the Fifties the Co- op completely dominated the retail grocery trade; now it occupies a small corner. Maybe the bid will succeed and the Co-op will face sudden death; even if it fails, the alternative looks more like death by a thousand cuts.

But it is not just in the Co-op itself that the co-operative dream is fading. Building societies are co-operatives, founded so that people could save for their own homes, and, in saving, help others to buy them. Yet in the space of 10 years almost that whole sector will have changed to shareholder control. Just this week Alliance & Leicester shares hit the stock market. Abbey National converted some years ago; the Halifax (the largest of all) and the Woolwich are about to follow.

Even that other group of mutually-owned financial institutions, the life assurance companies, is now beginning to abandon co-operative status.

It is not a bad rule to judge people on what they do rather than what they say. At the height of 19th-century capitalism people were busy forming co-operative institutions - they deliberately rejected the stock market as a form of ownership in favour of self-help. Now, at a time when it has become fashionable to criticise the supposedly harsh values of the stock market, and praise the "stakeholder" virtues of co-operation, exactly the opposite is happening. Institutions which have taken 100 years or more to build up in co-operative form are being converted to shareholder ownership, because people are voting for it. Meanwhile, no significant new co-operatives are being formed.

That last point is surely the killer. The commercial world is extraordinarily fluid. You would expect companies to rise and fall, to change their shape and their ownership. But you would also expect similar activity among new enterprises. Yet while there are enormous numbers of new businesses being created, there does not seem to be the same energy in the co-operative sector. Why not?

There are several possible reasons. One is that the commercial sector, spurred by competition, has lifted its game. The Co-op stores are finding it tough because Tesco and Sainsbury are much better than they were 25 years ago, and they are better because the lidless eyes of the financial markets are driving them to be better. One or (in the case of the life assurance groups) two centuries ago people needed new co-operative ventures because the quality of the commercial alternatives was at best uneven, and at worst dreadful. Now any new consumer desire will quickly be spotted and met.

That leads to a second change: the need for professional, specialised, driven management. It was a fairly straightforward business running a retail group or a financial institution two or three generations ago, and it was not difficult to attract quality management. Now management has become intensely specialised, and organisations without clear ownership seem to find it difficult to attract and retain these skills. Good people who might start co-ops seem to prefer to start their own businesses instead.

There is a practical example of the failure of co-operative management in the famed Meriden co-op which, backed by the then Labour government, took over Triumph motorcycles It collapsed. But now, as The Independent reported last Saturday, the business has revived under a single, gifted owner and is successfully pushing back the frontiers of Japanese domination at the top of the market.

A rather different reason may be the growth of the state since the Second World War. The self-help ethos which founded the 19th-century institutions grew up in a period when there was no presumption that it was the job of government to take responsibility for encouraging home ownership or pension provision. So co-ops happened because if they didn't, nothing got done. Now it may still not get done, but there is a state to blame.

Will this change? I think it may. The idea of the co-operative is too good, too long-established, too attractive a concept to disappear for ever. There are small-scale co-op enterprises being founded now that never hit the headlines. A tiny number may grow into substantial businesses. They will be helped by other structural changes taking place in the economy: the ability of the Internet to link like-minded people together; the fall in the unit size needed to be successful in a business; maybe even the spur of the retreat of the state.

But if the movement is to revive, it will have to do so from the bottom up. It will happen because people want to co-operate, not because they are told to by some politician. What government can perhaps do is to remove roadblocks. Somewhere out there, maybe some future Co-operative Society is being created. We just haven't heard of it.