A Brief Introduction to their Types,

History & Social Change Prospect


by Elizabeth Bowman and Bob Stone
December 2007

DEFINITION
A cooperative (also co-operative and co-op) is an autonomous, non-governmental association voluntarily formed to meet its members’ economic, social, and/or cultural needs through a jointly-owned, democratically-controlled enterprise.

Cooperatives are created by pooling or mixing interests, properties or labors.  Members “throw in their lot” with other members who do the same, with a view to realizing benefits impossible by action ad seriatim. Such benefits may include economies of scale, increases in productivity, retention of profits by workers or the comradeship of coordinated group action.  A cooperative is distinguished from a capitalist enterprise by its egalitarian structure its goal, and its status.  It is owned not by outside investors but by its members, one-member-one-vote. Its goal is the mutual benefit of members themselves, with the result that if a co-op is for-profit, profit is a means only, not an end, and such profit may be sacrificed, e.g. in exchange for free time. Co-ops are autonomous with regard to states, though they are typically socially-owned in undivided shares and serve a public good.

TYPES & GROUPINGS

Any economic activity can be conducted on the cooperative model.  Cooperatives may be generally classified as consumer, worker, producer, credit or marketing cooperatives  –  or by sector. Traditionally cooperatives have been divided into economic sectors of agriculture, banking and credit, consumer, fisheries, housing, insurance, and workers’ co-operatives.  Each of those eight sectors has its own global organization whose members are the corresponding national associations, and in turn their members are the individual co-ops of those types in the various countries. (A distinction is made between producer and worker cooperatives inasmuch as large corporations may join together in producer co-ops  –  Welch’s and Ocean Spray are United States cases  –  without practicing workplace democracy.)

Uniting these eight global organizations of cooperatives is the International Cooperative Alliance (ICA), in Geneva, a UN-recognized consultative NGO linked to the UN’s International Labor Organization.  But cooperativism is expanding.  It permeates many other activities, from car-sharing and child/elder-care, to health care, home and hospice care, funeral services, computer consultancies, orchestras, schools, tourism, utilities (electricity, water, gas, etc.), transport (taxis, buses, etc), and more.

Because of their distinctive property form, neither entirely private nor entirely public, cooperatives are said to be part of a “third sector” or “social economy” (sometimes: “social and solidarity economy”). Grouped under the latter are other democratic economic practices such as fair trade, social currencies, and credit unions. Advocates of cooperatives and the social economy divide between those who see in them complements to capitalism or replacements for it.  At the World Social Forum held in Caracas in January 2006 under the slogan “Another world is possible,” over a third of all sessions were devoted to cooperatives and the social economy, mostly as replacements for capitalism.

CURRENT STATUS & POSSIBILITIES

With 800 million members world-wide, co-ops are major economic actors.  They provide 100 million of the planet’s jobs, 20% more than multinational enterprises!  The ICA reports that in the most cooperativized continent, Europe, over 140 million are members of co-ops of all kinds. Over 10% of France’s employees work in co-ops – not extreme in western Europe.  Surprisingly, in the US, as National Co-operative Business Association reports, co-ops of all kinds serve some 120 million members or 4 in 10 citizens.  Included are: 10,000 credit unions, 1000 rural electric, 1000 mutual insurance companies, 6,400 housing, 3,400 farm, 270 telephone, and about 300 worker co-ops (a small percent compared to Europe). Worker co-ops are most frequent in Venezuela and Argentina, credit unions in Mexico, agricultural co-ops in Cuba and Brazil.

Since democratizing production can transform an economy, worker co-ops have attracted social change advocates. Surprisingly, most comparative studies show them to be more productive and profitable than similar capitalist firms. Given this pivotal advantage, a cooperative sector, not just the odd co-op or even co-op network, could out-compete traditional firms on their own criteria. Varied explanations have been offered for this advantage. It may be due to owner-members’ stakes in its success. And the pooling of knowledge that would otherwise go unshared may be important.  Finally, worker co-ops, freed of the burden of costly managers and absentee shareholders, enjoy financial buoyancy and more options. Instead of being hired by capital for its ends workers would voluntarily join together to hire capital for their ends. If the current economic crisis matures, this taming of markets and narrowing of the wealth gap would bring welcome global economic security and balance.

Based on the premise that cooperatives are public goods – stimulating production and stabilizing demand – measures that would foster growth of a co-op sector in the U.S., for example, might include: community economic development (with neighborhood control of major pieces of municipal and county budgets); tax breaks and priority in government contracts; publicly funded co-op market research; establishment of revolving loan funds for cooperatives; widespread education in cooperative management and accounting; and letting workers themselves use their retirement funds for major buy-outs. Workers empowered in these ways would likely insist on democratizing not only production and investment but also distribution, yielding a viable cooperativized economy. Arguably, the weak effort in that direction made by the former Yugoslavia does not suffice as a counter-example, as we indicate below. Enterprise by enterprise the market in human labor would be abolished and collective decisions would displace “market forces.”
HISTORY

The cooperative movement – born along with and within capitalism as its built-in but radically opposite smaller twin – has for at least 160 years presented itself as an alternative to the dominant system’s antagonistic relations of production. While the utopian community set up by Robert Owen preceded the Rochdale Society of Equitable Pioneers founded in England in 1844, Rochdale is usually considered the first successful co-operative enterprise. Its principles inform the modern movement. Of the following 7 principles of cooperativism, agreed to in 1995 by representatives of the global movement, four were initiated at Rochdale.  Numbers one, two, three and five of today’s principles hark back to Rochdale: 1.voluntary and open membership;  2. democratic member control;  3. member economic participation;  4.autonomy and independence; 5. education, training, and information; 6. cooperation among cooperatives;  7. concern for community.

As mechanization was increasingly forcing skilled workers into poverty, a group of 28 weavers and other Rochdale artisans opened their own store in December 1844. They sold food items workers could not otherwise afford. In the four months prior to opening they had struggled to pool together one pound sterling per person for a total of 28 pounds of capital. The store opened with a meager selection of butter, sugar, flour, oatmeal and a few candles. Within three months, selection expanded to include tea and tobacco, and the co-op became known for providing affordable, unadulterated goods. When, to raise more capital, the Rochdale workers took on non-worker investor members, the new members outvoted the pioneers and set up a standard capitalist enterprise  — a trajectory that was to become all too common in future cooperatives.

Subsequent co-op history is a discontinuous tale of sudden upsurges and equally sudden collapses, followed by forgetting. By 1848 it was clear that capitalism could not deliver on humanistic claims of the French and U.S. revolutions. In that year of the first serious protests in Europe against capitalism as such, cooperativism as alternative often figured prominently.  And again, in 1871, co-ops of all sorts flourished briefly under the Paris Commune before it was brutally repressed by the French army.  Later, in France in May 1968, the re-discovered idea of “self-management” swept through the economy, democratizing factories, apartment blocs, even corporate offices. As the ferment of debate permeated occupied businesses radical change in a developed nation seemed possible. Opposed by the De Gaulle government and subverted by the Communist Party, however, the 1968 uprising was reduced to being yet another flash in the pan.  In 1974 workers in the occupation strike at the Lip watch factory at Besançon, France re-started production under “self-management” and began selling their products – an important innovation over the 1968 struggle.

Starting with Rochdale itself, the cooperative movement has been consistently dogged by what has been called “the degeneration problem”: re-absorption of co-ops by capitalism. solved Part of that problem – vulnerability to buy-outs – was largely solved by the “individual capital accounts” invented in the 1950s by the Mondragón Cooperative Corporation in Spain’s Basque country.  The Mondragón network became a movement model by demonstrating that a major producer of capital goods could go up against capitalist firms and prosper.  However, MCCs choices to enter first the European and later the global markets resulted in centralization of management and sacrifice of much of the democracy that had distinguished it from its capitalist competitors. At the same time however, a long-term democratization of production in capitalism itself may reflect investors’ growing difficulty in exacting more labor and hence more profits without giving workers “a piece of the action” or a semblance of it.

RECENT UPSURGE IN COOPERATIVISM IN LATIN AMERICA

Latin America has seen a relatively continuous upsurge of cooperativism as means of countering neo-liberal globalization policies started in the 1980s.  Cuba, after withdrawal of Soviet credits in the early 1990s , sharply boosted productivity by allowing formation of relatively autonomous co-ops on sluggish collective farms.  And starting in 1994 in Mexico’s southernmost state of Chiapas, the Zapatistas grew a network of mostly agricultural co-ops at the heart of “communities in struggle” for regional economic autonomy.  These communities seek to both survive and replace globalization. Also in the early 1990s, Brazil’s unemployed rural workers began successful occupations of unused land, also starting co-ops – a continuing movement. And since 2001, over 200 factories in Argentina and Uruguay have been occupied and cooperativized by their workers.

Encouragement by Venezuela’s Chavez government has since 2003 elicited over 100,000 co-ops –  a significant sector of the economy. Despite a conservative expropriation policy, that government is evidently betting that the co-op sector, given its greater productivity, will outstrip the still-dominant capitalist sector, attracting mass defections from the latter. In the uprising in France of May, 1968, factories were merely occupied.  In the new upsurge in Latin America, factories and lands –  many in distress or fallow  –  are being re-started by their workforces as co-ops, supporting themselves by production and sales.  These are major advances in the struggle for solidarity economies.

Starting in the 1980s neo-liberal “free trade” policies have globally provoked runaway shops, “outsourcing,” and capital flight – with attendant global financial instability. The premise of the new cooperativism is that the mobility of capital will be greatly restrained if it is anchored within commuting distance of the homes of the worker-owners who collectively own and use it.  Since per worker income is not increased by bankrupting and taking over the competition, the grow-or-die imperative that treats global warming as an “externality,” will yield to moderated competition among co-ops whosel  concern will be mainly to retain market share. Such enterprises will tend to“internalize” polluting effects since worker-owners will be the first to experience them. Finally, cooperativization will tend to halt the currently threatened descent into full-blown global economic crisis, since workers’ more equal incomes will allow them to buy what they produce, thereby creating the “effective demand” needed to stimulate or re-start production.

RISKS

The project of starting within capitalism so as to transform it non-violently into something different and better, is not risk-free. “The degeneration problem,” for example, can present itself in many forms. A productive and profitable co-op can so boost its own market value that its members will be tempted to sell out to larger corporations or hire wage workers so they can retire early.  And co-ops can develop “enterprise consciousness,” breaking solidarity with same-sector workers and thereby ceasing to be models. And while Yugoslavia’s 50-year project of a worker-managed economy was targeted for subversion from without by capitalism’s ideologues, it also failed due to over-centralized political control, that is, to insufficient faith that autonomous worker co-ops can meet needs.

Corrective strategies are available. “Inter-cooperation” among co-ops, sectoral solidarity via unions, and cross-border organizing will avoid enterprise consciousness while presenting divide-and-conquer adversaries with a united front. Since they aim not at profit but at meeting members’ needs, cooperatives inherently serve the public good. If cooperativization is made a conscious policy of political parties and if governments extend credits to workforces to form co-ops or to buy out their bosses, giving them tax breaks, the chances that co-ops will permeate whole economies will greatly increase. The project of replacing capitalism with economic democracy may not have History itself on its side, but if choices on a global scale are made in its favor, it is not out of reach.  In any case, we will not know if it is possible until it is tried.


FURTHER READING

Ethan Miller, “Solidarity Economics: Strategies for Building New Economies From the Bottom-Up and the Inside-Out,” Grassroots Economic Organizing:  The Newsletter for Democratic Workplaces and Globalization from Below, www.geo.coop

“Cooperative Alternatives to Capitalism,” Special issue of Humanity &  Society, Vol. 28, No. 3, August 2004, edited by Frank Lindenfeld

Website of International Cooperative Alliance (ICA) — “Uniting, representing and serving cooperatives world-wide,” www.ica.coop

Website of National Cooperative Business Association (US), www.ncba.coop

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