Co-operative Businesses - A way forward?

I’ve been on an interesting line of investigation lately, which I thought I would share with others. About the time I was reading the Transition Handbook I got online and watched some videos on peak oil by Richard Heinberg. In one of them he was in discussion with a man called Gar Alperovitz (http://www.garalperovitz.com/), an American scholar and author of the book America Beyond Capitalism - Reclaiming Our Wealth, Our Liberty, and Our Democracy. I’m half way through this now, and it has spun off into another line of interest to follow. The core of his book thus far is:

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The American economy is too tied to big business

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This has led to the Haves and Have Nots that are so extreme in the US

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Research shows that the Have Nots don’t stay in one community as long as the Haves, and so become more disconnected from the society around them. They also don’t participate in local or national democracy

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In order to reclaim a fair democratic system, these Have Nots need the economic stability to allow them to move into a life where they are not living pay to pay, and they have the time to look around and engage in their local and national community more (obviously everyone will do this to varying degrees, not everyone wants to get involved in local community projects or politics)

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Some of the best ways to enable this to is through wealth redistribution, but not in a trickle down way of taxing and redistributing, as this is not based on a system that empowers people – you end up with hand outs and large groups of people who are disenfranchised and not in their power.

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Co-operative business models are a great way of distributing wealth, empowering people in their lives, and preventing wealth accumulation by a few at the head of a business. Other democratic wealth options advocated are community land trusts, and local government retaining ownership of utilities and land to generate an income stream alongside rates/taxes.

Alperovitz’s key thoughts come through his academic research, but also strongly by his experience in run down cities in the states, where during periods of economic decline corporations will often shut down industrial plants and move elsewhere where they can get more tax-breaks – what appears to be a common practice in the US. He was involved in Cleveland project in the 70’s where this happened. 5000 workers decided to try buy the company themselves. It did not happen, but sparked a moment in those parts of worker owner co-operative businesses. In recent years, with the US being hit by economic woes far greater that we saw here in NZ, there has been a surge in the number of and interest in such models. From what I have read there is also a lot of academic research in the US into the varying structures and effectiveness of co-ops.

The main argument for such co-ops are that the workers, being the owners, are not just driven by profits. While profits are good for them, they are also concerned for the workers, the families of other workers, and of the value of the business to the wider community they live in. In tough times they won’t up and leave, they will, where possible, engage the workers to find solutions, rather than being based on a more hierarchical management structure where management may or may not even consult lower order staff on their ideas (if you do some research you will find a much better explanation and more reasoning that I summarise here).

Alperovitz is now working on the US equivalent of the UK based New Economics Foundation (http://www.neweconomics.org/), and what used to be Schumacher Society – The New Economics Institute (http://neweconomicsinstitute.org/). He is also involved in an organisation called Community Wealth.Org (http://community-wealth.org/ ) that comes out of the University of Maryland. Thei raims are to provide “comprehensive and up-to-date information resource on state-of-the-art strategies for democratic, community-based economic development.” It’s a very in depth website, on everything from business models for cooperatives to policies for state governments, which support the Community Wealth model.

As seams to fall into place when you are on a new exploration of ideas like this, I checked into Facebook yesterday to see a shared post by Nando Tanczos from the New Internationalist about the growth of co-op businesses - http://www.newint.org/features/2012/07/01/co-operatives-international-year/ and then found out it is the UNs Year of the Co-op (http://2012.coop/), which aims to raise awareness about them as a way forward – “Co-operatives are a reminder to the international community that it is possible to pursue both economic viability and social responsibility.” Ban Ki-moon, UN Secretary General.

And while first thoughts on this stuff can be “sure but a few small co-ops doing their thing is hardly a challenge to corporate capitalism”, a report on the UN website shows just how large this movement is. The biggest 300co-ops in the world have a net profit bigger than all but the biggest 8 countries in the world – combined these 300 businesses made USD 1.6 trillion in 2008! But its not just the big guys that have an effect, “In total, about 1 billion people are involved in co-operatives in some way, either as members/customers or as employees/participants, or both. That is a significant force united behind a unique business philosophy…co-operatives continue to grow steadily, raising the overall welfare of people around the world in a spirit of solidarity rather than exploiting them for selfish ends.” Charles Gould, ICA Director-General (International Cooperative Alliance) (http://2012.coop/sites/default/files/media_items/Global300Report2011.pdf). Most co-ops are 5-50 people, and might be as simple as a group of farmers coming together to access micro-credit and break a cycle of debt with a local landowner.

I will need to read more to see what research has been undertaken on if/when a co-op becomes so large it is (more or less) just another corporate monster and not very responsive to their 000’s of workers. But I have not got there yet…

The importance of this work for me is the idea that while capitalism in its current form clearly has some huge flaws, it is not going to just fall over. Vested interests will grasp at power as long as they can. Alperovitz's opinion is we are in for a long state of decay, while new ways emerge. Or, if multiple  economies did fall over all at once then so would we – we are too intertwined with global supply chains to survive well in a large scale economic meltdown. Supermarket shelves would last a week or two before we all got very hungry (I’m working on becoming more resilient for food and energy, but that’s another story). As Alperovitz mentions a few times in his book, we have free market corporate ideas on one hand and socialism on the other, neither of which has worked well in most places (I’m no historian so can’t argue the pros and cons here – I will leave that to others). Perhaps somewhere in the middle are co-operative (social) business practices - businesses run by the people for the people. Or put another way, community wealth based capitalism. Coming back to Transition towns, co-ops provide a diversity of, generally, smaller worker owner businesses, creating economic and social resilience - the catch phrase of TT.

That’s not to say all co-ops will be ideal socially and environmentally responsible entities. Fonterra Co-operative Group is the 33rd largest co-op in the world for instance – it has a conservative membership with old school business and environmental values. Still $11.34b US was made last year and most of these profits are distributed to farmers around NZ, which then feeds directly in to local economies. However, from what I have read so far, co-ops are a positive step towards a middle road somewhere in between the 1% owning most of the wealth in the US, and the communist party controlling the people in China.

I welcome your thoughts.

Laine