The modern co-operative model arose from worker displacement caused by the rapid industrialization of late 1800s. Since then worker co-operatives have grown, demonstrating a vitality, viability and profitability largely unknown to the general public. Cooperatives provide an opportunity to strike a balance – a way, as Marlen Vargas Del Razo noted, to “inject life into capitalism” – making business profitable AND maintaining the highest goal to enrich the whole of society.
A cooperative is an entity that is owned by its members: it operates for the benefit of its members and it is controlled by its members. The two central characteristics of worker cooperatives are:
(1) workers own the business, and they share the profits.
(2) decision-making is democratic, generally adhering to the principle of one worker, one vote.
Worker control can take many forms depending on the size and type of the business. Some ways to make decisions democratically include:
* an elected board of directors
* elected managers
* management job roles
* no management at all
* delegation of some decision-making to smaller groups or people
* decisions made by consensus (everyone agrees)
* decisions made by majority vote
* any combination of the above
Worker co-operatives share a group of core values: self-empowerment, democracy, equality, fairness and unity; it is a basic principle that the ownership, control and benefits should belong to members.
Benefits of the Co-operative Model:
As membership-based organizations worker cooperatives tend to
• create long term stable jobs,
• sustainable business practices,
• Connected and accountable to their community
• Creates community benefit rather than destroying it
• Success is evaluated by looking not just at the money they make, but at things like their sustainability as a business, their contribution to the community, and the happiness and longevity of their workers.’ — “Multiple bottom lines”
• Cooperatives build movements for economic justice and social change: as institutions where real democracy is practiced on a day to day basis, co-ops are a model for self and group empowermenT
• Cooperatives present a new model for redefining growth in a world of finite resources.
Co-operatives are “part of a socialist agenda” One could argue that socialist countries have co-opted the co-op – except in socialism you’re working for the state, not for yourself and your co-workers.
Worker cooperatives are actually ‘private ownership’ as the company belongs to the members of the cooperative. Cooperatives are closer to capitalism than to socialism. In a pure socialist world the entire enterprise would be controlled by the government. A pure socialist world could not allow for cooperatives as they are a step in the direction of capitalism. The co-operative model is thus closer to capitalism as there are no rules that prohibit cooperatives from making revenue – and that revenue increases the capital stock – which in turn belongs to the members of the cooperative (or the stock holders). A cooperative is thus only a simpler form of a stock company.
In many co-operatives, workers invest with a buy-in amount of money when they begin working. At the end of each year, worker-owners are paid a portion of the money the business makes after expenses. In conventional businesses this money is called profit, in co-ops it is called surplus, and it can be distributed based on hours worked, seniority, or other criteria.
Cooperatives are a Worldwide Movement: A few examples
United States There are 21,367 cooperatives in the six sectors. (2005) These cooperatives have more than 127.5 million members.* Adding in the memberships of three additional large consumer co-ops would increase this number to 130.5 million. Cooperatives in these six sectors employ considerably more than 500,000 Americans, with aggregate payrolls of more than $15 billion annually. Total annual revenues in excess of $211.9 billion.** (2005)
Adding in the revenues of 10 additional large purchasing cooperatives and three additional large consumer co-ops would increase this number to $229.7 billion. Over 130 million people are involved in co-ops – a large percentage of those in credit unions: One person one vote banks. US: 2,100 farmer co-operatives achieved record sales of $246bn in 2013
The Alaska Permanent Fund: oil revenues are used by the state to give everyone a dividend “as a matter of right.” This is another example of “democratizing ownership”
Argentina now has over 30,000 co-operatives across public services, banking, communication, retail and industry. Following the financial crisis, many companies were taken over by workers, and these co-operatives now provide jobs for 13,000 people. The takeover of bankrupt companies under the co-operative model has continued after the crisis. Over the past three years, employees have saved more than 60 such companies by setting up worker co-operatives
China Within the past decade, the Chinese government has opened up the market for farmer co-ops
Africa Malawi alone has 681 co-ops
Australia, there are around 1,700 co-operative and mutual enterprises, which make up 6% of the nation’s earnings – the same as the mining sector. (13 million members – four million in banking, 1.5 million in insurance, 7 million in motorist mutuals, 1.5 million in retail and more than 50,000 in other co-operatives.)
Iceland pilot project is to establish a program for prospective cooperators. The pilot target group consists of job seekers who have suffered long-term unemployment. This project is established in cooperation with the Innovation Centre Iceland and The Directorate of Labor in Iceland.
Spain Mondragon is a 50 year old network of cooperative businesses in Spain with 84K employees and 25 billion dollars in revenue. The region of Spain where the company is located has the lowest unemployment in Spain.
And there are many more examples
Questions to consider:
Despite their size and ubiquity, across the globe, why is there such limited awareness of co-operatives?
How do you run a large democratic and egalitarian organisation in a capitalist economy, where everyone else is doing things in a non-democratic and in-egalitarian way?
Ha-Joon Chang University of Cambridge author and economist and author of Economics: The User’s Guide calls this lack of awareness about co-operatives “an identity crisis. He argues that co-ops do not promote themselves well.
Hua writes, “co-operatives need to define and communicate what they stand for: do they exist to serve their members or do they have a wider social purpose?” and “One disease of capitalism today is that the influence of short-term impatient capital has become too strong. Of course you want some liquidity and speed. But my view is the balance has been broken. Whatever delivers a result next quarter, at most next year, is preferred over long-term development of the enterprise. Frankly, shareholders couldn’t care less. They ruin a company by not investing, demoralising workers, destroying subcontractors; that’s not their problem because next year they will own some other company.”[Hua]
Challenges for Co-ops: Funding
Gaining access to finance worldwide remains a big obstacle: obtaining loans for co-ops in our sector is still difficult”.
Many countries have tax incentives for existing co-operatives to fund new co-ops
Many co-operative federations have a membership requirement that a percentage of profit goes to co-op development. “No profit, no contribution
Argentina has a 5% levy applies to co-ops to support the development of other co -operatives.
In Italy, Legacoop members contribute 3% of their profit to fund development. (15,000 member co-operatives with €56.5bn (£42.6bn) in turnover and 8.5 million members.)\
“Mondragon expects its co-op members to contribute 10% of profit towards mutual solidarity,”
See the interview “Cooperative Capitalism” with Marlen Vargas Del Razo, Tess and Jeanne Kenney
CoopStartup is a site that “aims to increase co-operation among co-operatives. CoopStartup promotes a number of activities, including Farmability, a call for proposals for new co-ops in the agricultural sector.”