Democracy at Work: The cooperative model as a solution to the failures of global capitalism

Preface

A paradigm shift occurred on a global scale after the Berlin Wall fell in 1989. Following the collapse of the Soviet Union, the liberalization of the members of the Warsaw Pact, and the balkanization of the former Yugoslavia, a new but brief wave of democratization was ushered in across the globe[i]. Consequently, the end of the Cold War was marked by the emergence of a new world order — one dominated by neoliberal economic policy. The now nearly universal predominance of these policies, with assistance from such institutions as the IMF and the World Bank, accelerated the process of liberalizing the economies almost every sovereign state on the planet. The rise of liberal democracies around the world paired with an unprecedented growth in global wealth resulted in some lauding this global moment as the “End of History[ii].”

However, a series of challenges have emerged — in the form of increasingly disturbing patterns — which threaten quality of life, the predominant social order, and democracy itself. While overall wealth has increased, wealth inequality has reached historic highs across the globe[iii], economic recessions have become more inevitable and threatening[iv], and human-induced climate change has continued to the point where its consequences have already begun baring their teeth[v]. Our inability to face these problems with any sort of real coordinated action has been theorized by some as the result of the increasing political power exercised by the monolith of international finance, which results in gridlock whenever democratic solutions to these problems are proposed.

In the typical political model of a liberal democracy, democracy itself is “confined to the political sphere[vi],” which is made distinct from the economic sphere. Within the economic sphere democracy is almost entirely absent besides some elements of civil society, as well as some other examples that will be discussed later in this essay. Most private organizations are organized hierarchically, and virtually all decision-making power rests in the hands of their owners. Additionally, current patterns show that an increasingly large proportion of global wealth creation is going into the pockets of an ever-fewer number of individuals and entities. Now, the increasingly oligarchic nature of the global economy has begun to reveal itself in the way financial interests can affect the democratic process. Whether by putting money behind parties and candidates that promise to uphold the status quo or by lobbying members of our democratic bodies to loosen the reigns of regulation on the private sector, it is becoming increasingly apparent that money votes. This political power that the wealthiest individuals, largest corporations, and biggest multinational banks wield over modern international affairs amounts to nothing less than a colonization of the political sphere by the economic sphere[vi]. If it is the antidemocratic nature of the private sector which is bleeding into our democracies, could democratizing the economy be part of a solution?

I. Introduction

Are cooperatives viable as an approach to improving the current economic system? Does the evidence suggest potential for real-world application, and could cooperativization play a role in a gradual revolution? The contemporary idea of revolution implies a redistribution of wealth and power from pockets of the few to the hands of many. However, the growth and expansion of cooperatives, as profitable enterprises functioning within a free market, does not entail a class war or the dissolution of the state. Cooperativization instead offers a way to transfer power to the people on a small scale, by democratizing the economic sphere within the parameters of the free market.

A cooperative is defined as “an autonomous association of persons united voluntarily to meet their common economic, social, and cultural needs and aspirations through a jointly-owned and democratically controlled enterprise[vii].” A private enterprise is also autonomous, voluntary, and intended to satisfy some social need, but its definition diverges significantly as to the nature of management and ownership. The democratization of management and ownership is what makes cooperative enterprise distinct in a free market system, as decision-making power is distributed according to the ownership of an enterprise. In investor-owned corporations, the management structure is hierarchical, but ultimate decision-making power is generally concentrated among the few investors with the most shares, based on the principle: “one share equals one vote.” Constant growth would serve as the primary incentive if management were controlled by the few largest outside investors, as return on investment would be their primary motive. The same principle applies to privately owned enterprises: the larger the enterprise, the more akin to autocracy the distribution of decision-making power appears to be. Both scenarios are characterized by the fact that most of the stakeholders — both customers and employees — play little to no role in the incentives structure. The reasoning behind the contemporary private ownership model is based on the noble idea that an entrepreneur is entitled to the benefits of their success, but there appears to be — at least in practice — a false notion that entrepreneurship is a purely individual exercise. Not only could an entrepreneurial endeavor be embarked upon by a large group of people cooperatively, but most large successful private enterprises were only able to reach their size with significant contributions from a large group of people with little to no ownership stake in the company.

In the cooperative alternative, ownership is democratic in that it is shared by the stakeholders — or members — of the enterprise, whether it be the workers, the customers, or a mix of both. In turn, the decision-making process is also distributed equally among those members, so decisions are made democratically. In a cooperative organizational structure this democratic style of management is incentivized, thereby ensuring secure and well compensated employment for the workers, a commitment to sustainability and the environment, long term financial planning with security in mind, and the efficient delivery of quality goods or services at an affordable price. Additionally, members will still have a personal stake in the growth and success of a cooperative enterprise, as the surplus of their labor is distributed evenly among themselves, and an enterprise of any organizational structure must nonetheless remain profitable.

Today, with the Soviet Union in rubble and fully global neoliberal capitalism nearly realized, private capital, often in the form of multinational banks and corporations, now exercises a considerable amount of control over global affairs. However, the prospect of cooperatives competing with corporations at an international level is an intimidatingly challenging endeavor with the disparity in liquid assets and economies-of-scale considered. Despite this, we can help displace and diminish the role of international corporations and other un-democratic enterprises at the local level by satisfying basic needs and services through cooperative enterprises. By invigorating our local and regional economies with cooperative organizational principles, we can begin the process of democratizing the economic sphere, with the aim of preventing “Capitalism [from eating] Democracy[vi].”

II. How do cooperatives work?

To reiterate, the key characteristic of a workers’ cooperative is the democratization of management and ownership. This means that instead of outside investors being the primary owners of a company, and return-on-investment (ROI) being their primary incentive, the workers themselves own the company. Just as the primary investors in a joint-stock-company exert control over the business through the board of directors, the owner-workers of cooperatives would participate democratically in management. When ownership and management are democratized in such this way, the primary incentives are not financial, as is the case with investor-owned enterprise, but are instead based on satisfying social needs. Again, this does not mean profit is a non-issue, as cooperatives must turn a profit in order to stay in business and avoid cutting costs.

The International Cooperative Alliance (ICA) revised the Rochdale Principles into a set of seven principles[vi] that provides elaboration as to the functioning of a cooperative:

1. Voluntary and open membership

Voluntary membership, non-discrimination.

2. Democratic member control

One member, one vote.

3. Member economic participation

All members are owners, with some capital being common property of the coop.

4. Autonomy and independence

Ensure autonomy, outside help must be taken without compromising on principles.

5. Education, training, and information

Provide education and training for members, spread awareness of cooperatives.

6. Cooperation among cooperatives

Cooperatives working together at every level.

7. Concern for community

Sustainable development.

There exist two primary methods by which to go about starting a cooperative. One strategy involves converting an existing business to a cooperative by transferring ownership to the workers, while the other strategy involves workers coming together and accumulating the capital necessary to start a new business through cooperation from the start[viii]. For the purpose of this paper, these alternative strategies will be referred to as cooperative conversion and cooperative entrepreneurship, respectively.

The cooperative conversion strategy entails transferring ownership and decision-making power to the workers of an existing private enterprise. This is appealing in rural settings where small town main street lives or dies based on the success of family-owned businesses. The children of these families often have careers of their own and don’t want to be bothered running the family business. Then, the prospect of selling the firm brings with it its own challenges, as there are often few potential buyers, and those that do buy are often “primarily interested in purchasing customer lists and certain firm assets without much or any intention of keeping the business open in its current locationviii.” However, this could be even more appealing as a way to help workers take over factories and other more industrial organizations when economic downturns or poor management result in the closing of something like a factory. The fact that modern capitalism has made recessions a virtually imminent fact of life could mean an opportunity to use the flaws of the current system against it. If such businesses are employed by skilled professionals prepared to take on the responsibility of ownership and management, conversion might be a viable approach. On the other hand, the cooperative entrepreneurship strategy presents challenging obstacles in the form of both acquiring proper funding and finding willing and committed members. Cooperative entrepreneurship also presents the same challenges that come with private entrepreneurship, such as meeting a real demand and operating profitably. It is much easier to convert an already successful business into a cooperative, just as it is easier to invest in a successful business rather than starting one yourself.

Cooperatives can be placed into five different categories is regards to ownership. There is the consumer cooperative, which is owned by its customers, the producer cooperative, which is the organization of several similar producers like farmers, the employee-owned cooperative, in which the primary service is the employment itself, cooperatives of businesses and organizations, and multi-stakeholder cooperatives, which use more than one membership component, like if a retail cooperative was owned by both the consumers and the employees.

A consumer cooperative typically comes in the form of a retail chain, often grocery-centered, and is defined by the characteristic of being owned by the shoppers, its members. Of course, a consumer-aimed ownership component can also be made part of a mixed cooperative organizational structure. A producer cooperative is a cooperative venture taken on by a group of usually small producers, such as individual farmers, to purchase their inputs and sell their outputs collectively, instead of needing to compete amongst each other over very little. It only takes a little bit of creativity to see the opportunities for cooperation between agricultural/producer and consumer/grocery cooperatives.

A cooperative of businesses is much like a producer cooperative, except that instead of being comprised of producers, it is comprised of (usually) smaller businesses. As has already been noted, cooperative ownership and management of a firm is best taken on by skilled laborers who understand the business process behind their work; a cooperative convenience store would be unlikely to show promise. However, a group of small businesses like convenience stores or boutiques could still organize horizontally to the same purpose as a producer cooperative, to buy inputs and sell outputs, or even to find better, more affordable health insurance to employees. Protecting small businesses still satisfies the goal of reducing the presence and role of large corporations, while also keeping wealth within the community in which the enterprise operates.

A workers’ cooperative is the most notably democratic of the cooperative organizational structures, but it is also one of the most uncommon. The purpose of a workers’ cooperative is the satisfaction of workers’ needs, who are the primary stakeholders. This differs from other models where the delivery of a good or service might take primacy over the needs of each worker. In the case of a workers’ cooperative, (usually) skilled workers come together to sell their labor more effectively in order to achieve gainful and reliable employment, instead of competing among one another to sell their labor to the lowest bidder. Note that a workers’ cooperative is dissimilar from a union because the workers own the means of production. Indeed, a union is a group of workers coming together to sell their labor more effectively, but a union is generally still at the behest of employer, who still benefits disproportionately from the fruits of their labor. This means that one of the primary challenges facing the establishment of workers cooperatives is not the ability to organize workers, but the ability to finance the co-opting of the means of production necessary for the workers to operate their own enterprise.

Following the 2008 recession, some 200 workers at Republic Windows and Doors — a factory in Chicago — were fired without notice or any sort of benefits[ix]. After protesting and receiving national attention for their plight, they were able to negotiate with the bank that shut them down and received compensation. Then came a new private owner and work resumed, but the factory doors were closed again just a couple years later, again, without notice. To no surprise, TV crews showed up again, but this time they would receive attention an organization called “The Working World,” a non-profit that provides loans to cooperative start-ups by means of a revolving door fund[x]. With a loan from this fund, 22 of the workers were able to buy the equipment necessary to start up their own factory called “New Era Windows LLC.”

III. Cooperative Economics

Cooperative economics entails an incorporation of co-operative studies and political economy to the study and management of cooperative organizations. The principles of cooperative economics also serve as the conceptual basis for both Mutualism and Syndicalism: an economic system proposed as an alternative to Capitalism in which “industries are owned and managed by the workers[xi].” Syndicalism in practice is the advocacy of cooperative units managing the economy and is therefore not necessarily a revolutionary ideology. The reformist section of Syndicalism has been typically overshadowed by the revolutionary section within anarchist organizations, but to advocate for the development of economic cooperatives within our current system as a voluntary approach — manifested out of necessity — creates a functional equivalency between the goals of Reformist Syndicalism and the goals of cooperative movements.

The major debate in the field of cooperative economics has historically been divided between the ideas of co-operative federalism and co-operative individualism. These competing schools are differentiated primarily in their perspective on membership. For cooperative enterprises in non-communal or non-Owenite scenarios, the producers and consumers of a product are two distinct groups of people, and membership is usually only ascribed to one of these groups. In co-operative federalism, membership is ascribed to the consumers. The proponents of co-operative federalism advocate for the formation of co-operative wholesale societies (CWS) in which the co-operative the societies themselves undertake purchasing farms or factories, and the dividends are paid back to the consumers, as they are the primary members. The best historical example would be the CWS in the UK known as “The Co-operative Group.” In co-operative individualism, proponents are alternatively focused on workers’ cooperatives, where the producers themselves own the enterprise, as opposed to the consumers. While co-operative individualists still advocate for the organization of cooperatives into federations like co-operative wholesale societies, they advocate that the dividends should instead be paid to the workers. Co-operative individualists often cite the Mondragón Corporation as an example of this. If consumers still play a membership role in this CWS, then the aforementioned scenario would serve as a hybrid of co-operative federalism and co-operative individualism. Co-operative individualism essentially favors the payment of dividends to the workers, but that does not disable the consumers from serving a quase-membership role.

The idea of a co-operative wholesale society is based on the potential for small individual cooperative enterprises to cooperate and coordinate among each other, enabled by creating organizations of cooperatives; in this case, consumer owned retail cooperatives. While the prospect of operating an individual cooperative enterprise is a challenging endeavor, cooperatives coordinating with one another display much more potential in terms of realizing their goals and operating efficiently. The potential for cooperatives to coordinate with each other by forming federations or by other organizational structures to a degree that is not possible among private ventures is one of the key components that differentiates cooperative enterprise from private enterprise. The development level of cooperatives in any single country can be classified according to the development level of their organizational structure. Cooperative development can be purely sectoral, in that the level of organization of a cooperative does not exist beyond the sector in which it operates. If a cooperative organization involves activities in more than one sector, even if most activities occur in one primary sector, its development level is cross-sectoral. If a cooperative organization is organized across multiple sectors, and horizontally integrated from producer-consumer, it has reached the integrated level.

IV. The History of Cooperatives

Cooperatives gained relevancy in the late 19th century as a response to industrial capitalism. Support for cooperatives was primarily a component of the labor movement, with their original intention being to “cope with the evils of unbridled capitalism and the insecurities of wage labor[xii].” The philosophical foundations of this cooperative movement were primarily based on the socialist writings of Robert Owen and Charles Fourier. Robert Owen was successful cotton trader but believed in bettering the conditions for his workers through the cooperativization of his cotton mills in New Lanark, Scotland. Due to the success of his efforts, he attempted to realize his dream of workers cooperatives around the world in the form of self-sufficient worker communes (Owenite communes) where employment and social needs are satisfied by the community itself to realize a significant degree of self-sufficiency. Owen first attempted to implement this design in North America, however most of his projects ended in failure. In Owen’s vision cooperatives would be the manifestation of the voluntary grassroots self-organization of labor with the intention of meeting their own needs, but in the form of entire towns as self-sufficient communes in which the consumers and producers in the equation are the same people. Owen’s conversion of his cotton mills into cooperatives would be an example of cooperative conversion, while his failed attempts to start cooperatives from the ground-up is an example of cooperative entrepreneurship. While the idea of collectivizing business has been explored all over the world as a component of Marxist-Leninism or Maoism, this was often coercive in nature, as these cooperatives were generally managed by the state and they existed within a command economy. Interestingly, cooperative principals played a role in the ideology of Italian Fascism under Benito Mussolini, who was influenced by the revolutionary syndicalist Georges Sorel. The history of actual voluntary cooperatives functioning in a market economy is generally confined to Western Europe and North America, apart from the brief predominance of European Fascism.

The first successful cooperative organization was the Rochdale Society of Equitable Pioneers, established in England in 1844. The members established the “Rochdale Principles” upon which they ran their cooperative (The foundation for the ICA principles outlined in the introduction). Their cooperative was retail-based favoring consumer membership, with the intention of selling basic goods to workers at prices they could afford, as the wages offered by the industrialists was less-than-livable. Over the next 140 years, various retail cooperatives would spring up across the UK, to the point where now “The Co-operative Group,” a CWS, is one of the largest cooperative organizations in the world with over 4 million members and over 4,200 locations[xiii]. This cooperative federation is primarily composed of retail-related consumer cooperatives but is also comprised of cooperatives in other economic sectors, allowing us to define the organizational level of cooperatives in the UK as cross-sectoral[xiv].

While the history of economic cooperatives begins in England, since then their example has paved the way for cooperatives to develop to the degree that allows them to play major roles in the economies of other Western nations, necessitating their inclusion in this analysis. Cooperatives first spread outside of England with Robert Owen’s cooperative experiments in North America, resulting in cooperative economics establishing a foothold in the United States and Canada. From here, the labour movement of the late 19th and early 20th centuries caused cooperative ideals to spread to France, Spain, and Italy, while Argentina has only just recently joined these ranks.

In France, workers cooperatives were made legal in 1848, then made illegal, then made legal again in 1864. In 1871 during the Paris Commune, workshops abandoned by their owners were taken over by the workers. By 1910 there were nearly 500 cooperatives in France, today there are at least 1700. The history of cooperatives in France is therefore characterized by the legal constraints which had to be overcome in order to allow for any expansion of cooperatives, which could perhaps serve as an explanation for the fact that the level of cooperative development in France has never exceeded a purely sectoral level[xiv].

In the Basque country of Spain, there exists the “Holy Grail” of cooperative organization: the Mondragón Cooperative Corporation. In 1941, a young Catholic Priest named Arizmendiarrieta established a technical college in a small town called Mondragón to help galvanize the local economy after the devastation of the Spanish Civil War. He founded this college based on his belief in a form of humanism that focuses on solidarity and participation, which worked well with Catholic social teachings; this was the same philosophical connection that helped Italian cooperatives thrive. In 1955, Arizmendiarrieta helped a group of recent graduates from the school establish the first company of the cooperative called Talleres Ulgor. When it opened in 1956, it marked the founding of the Mondragón Cooperative Corporation. Today Mondragón employs over 75,000 people in 257 companies in finance, retail, industry, and knowledge.[xv] Like is the case in the UK, this level of cooperative development is cross-sectoral[xiv].

Italy also has its own long history of workers cooperatives, but it is the abnormally high degree of development that characterizes the role of cooperatives in Emilia-Romagna centered on Bologna that makes the region so interesting and worthy of analysis. The large network of cooperatives in the region is now composed of over 8,000 cooperatives and small businesses[xvi]. The cross-sectoral scope and the geographic concentration of these cooperatives implies a level of development well beyond the levels reflected by Italy’s European neighbors. Just as is the case in Spain, the convergence of Catholic social teachings and cooperative principles has contributed significantly to the success of cooperatives in Italy. The two largest cooperative federations in the Emilia-Romagna region, Legacoop and Confcooperative, “are organized with strong historic ties to … the Catholic Church[xvii].”

Argentina’s history of cooperatives is mostly contained within the 21st century, with development only reaching a level worthy of analysis and inclusion over the past fifteen years. This history begins in 2001, when Argentina suffered a devastating economic crisis. The reactions towards this crisis were shaped by the fact that it occurred despite Argentina “following the [IMF’s] rulebook for over a decade[xvi],” resulting in workers becoming largely disillusioned by the neoliberal world order and the methods of private enterprise attributed to it, thereby spurning a movement aimed at factory expropriation.

The history of cooperatives in North America is the history of cooperatives in the United States, Canada, and more notably, Quebec. This history begins after the turn of the 19th century in the agricultural sector and is uniquely characterized by the pioneer experience. The first major cooperatives in North America were credit unions established in Quebec towards the middle of the 19th century, followed by developments in agriculture, or more specifically, dairy farming. Early dairy farmers in Quebec were often expanding into undeveloped areas, so they formed cooperatives among themselves in order to fund and organize creameries to process their outputs. Meanwhile, railroads allowed farmers in Canada and the United States to be spread out — and thereby made dependent on — other businesses to transport and market their crops or acquire the inputs necessary for agricultural production. To combat this, farmers created marketing cooperatives to take control of their shipping access to markets. In 1903, citrus farmers created the California Fruit Growers Exchange, which is today known as Sunkist, and is the largest marketing cooperative in the world fruit and vegetable industry (a producer cooperative)iv. Farmers formed similar marketing cooperatives in Eastern Canada at the same time, and by 1900 there were over 1,200 cooperatively owned creameries across Ontario and Quebec[xviii].

V. The Geography of Cooperatives

Areas with highly developed cooperative sectors, characterized by high degrees of integration, are largely confined to the developed Anglophone and Romanophone, or Latin worlds — primarily in the United States, Canada, UK, France, Italy, Spain, and Argentina. Cooperative organizations owe their philosophical foundation to movements that emerged from Britain, so one possible explanation for this pattern could be geographic proximity, with respect given to the adjacency of similar cultures and economies, and the common philosophical and ideological threads woven throughout them. Cooperative principles first spread to North America from England, then later spread to Western Europe. Argentina only joined the ranks recently, but modern communication has made geographic proximity irrelevant.

Portugal, Central Europe, Scandinavia, and most of Latin America are associated with a much more modest level of cooperative development. This could be explained by insufficient levels of industrialization, insufficient access to capital, or underdeveloped civil societies — the opposites of which are more typical of an environment conducive to cooperative development. For example, the largest cooperatives in Spain and Italy are concentrated in what are now some of the wealthiest regions of each country. However, they were established during times of political and economic insecurity before these areas became fully industrialized. The absence of sufficient access to education or skilled labor, a lack strong labor movements, and the spread of Communism may have precluded the development of robust cooperative sectors in Eastern Europe and Latin America, but this fails to explain why cooperatives do not play a more prominent role in the other developed economies of Central Europe, or in Scandinavia. Other explanations are required to explain the lack of cooperative development in other wealthy, industrialized European nations, especially when you consider their proximity to Italy, France, and the UK.

Cooperatives are usually formed with an intention to meet needs that the public and private sector fail to satisfy. The high standards of living that characterize Central Europe and Scandinavia today are largely explained by the nature of their welfare systems, or the interventions from their public sectors. Even so, the countries with large cooperative sectors are also welfare states. This might be evidence enough to argue that the different levels of cooperative development found in these similarly industrialized economies is the result of the divergent nature of the specific social welfare environments that characterize them.

In Danish sociologist Gosta Esping-Andersen’s The Three Worlds of Welfare Capitalism[xix], which categorizes the prominent welfare states (contained in Western/Northern Europe and the Anglophone world), their welfare systems are divided into three types:

1. The Liberal Model (The Anglo-Saxon world)
   — Minimalistic universalism, not connected to the social order
   — Benefits focused outside the labor market (poverty reduction focused)
   — Minimal direct influence on the economy and predominance of private social insurance
2. The Conservative Model (Central and Southern Europe)
   — Corporatist middle-ground, tied to social order
   — Benefits tied to employment, with some universal benefits
   — A conjunction of private and public social insurance
3. The Social Democratic Model (Northern Europe)
   — Centralized and universal, direct influence on social order
   — Benefits are universal and relatively disconnected from employment
   — Completely public; little to no presence of private social insurance

The nature of the Liberal model of social welfare explains the prevalence of cooperatives in the UK, the United States, and Canada. This welfare model is entitled as such because of the minimal role that public social insurance plays in the economy or, in essence, a separation of social welfare from the economic sphere. The wealth redistributing effects in this model are minimal and social welfare serves as little more than a universal safety net, but while it is universal, participation in this system is generally associated with a negative stigma. Most social services in this model are tied to employment, as they are provided by employers, but this means that generally only well-educated or skilled workers are entitled to such benefits, as the cost of providing such benefits is — or has become — too high for businesses to provide to low-wage workers. This separation makes cooperatives an appealing strategy for meeting social needs within an economy where private social benefits are often insufficient, especially for the working class.

The Social Democratic model sufficiently explains why, in contrast to the states of the Anglosphere, the wealthy nations of Northern Europe display no visible history of cooperative movements. The primacy of the public welfare state regarding the provision of social services outside of and on behalf of the economic sphere, accomplished through truly universal social services that permeate much of a citizen’s life means social needs are met without the workers having to organize among themselves independent from the public sphere, and the degree of wealth redistribution is significant. Basic social services like healthcare are provided by the state, and unemployment is associated with almost no risk to wellbeing.

The nature of the Conservative social welfare model, which traditionally characterizes Germany, The Netherlands, France, Spain, and Italy, helps explain the lack of cooperative development in Central Europe for many of the same reasons as the Social Democratic model, but it fails to explain the high level of cooperative development in Southern Europe. The Conservative model entails a preservation of the social order, which contrasts the Liberal model’s hands-off approach toward the social order. It also contrasts the universalist, actively progressive approach to the social order that characterizes the Social Democratic model. The Conservative welfare states of Southern Europe are described as such because they also serve to preserve the traditional social order, but they followed conversely divergent paths to industrialization. If the Catholic-Protestant divide between Southern and Northern Europe is considered, which is reflected by the overt dominance of the Catholic Church in Italy and Spain, a more modest presence in France, and a very minimal presence in both Germany and the Netherlands, one can derive the degree to which the prevailing social order is based on Catholic teachings, in addition to how the welfare system reflects this.

Among the Conservative welfare states, the Catholic Church is more dominant, and industrialization occurred later, in those with the highest levels of cooperative development. This could be explained by the fact that the implementation of the Conservative model in states like France and Germany began when industrialization was already in full swing, and there already existed a division between the working and professional classes. With this considered, the Conservative model appears to be comprised of two distinct approaches to welfare. First, there is the corporatist approach, which characterizes Central Europe and, to a lesser degree, France. The corporatist approach is also referred to as the “Bismarkian” model in the case of Germany and the Netherlands. Unlike the Social Democratic welfare states of Northern Europe, corporatist welfare states were designed to allocate different social benefits to different classes of people, and thereby preserve the social order.

Modern France is a standout because, while the economic conditions under which its welfare system developed mirrors Germany and the Netherlands, it is a much more religious country, with revolutionary origins. While the development of cooperatives in France has not exceeded the sectoral level, it is still far beyond levels of cooperative development found among its Germanic neighbors. The fact that this is the case, despite France maintaining a similarly corporatist welfare model, could be a result of the cultural institutionalization of Catholic social teachings.

It is also necessary to point out that the large cooperative federations found in Italy and Spain are exactly the sort of horizontal forms of industrial organization advocated by Anarchist ideologies. Mikhail Bakunin — one of history’s most influential anarchists — has been credited with popularizing anarchist ideals in these countries during his time living in Italy[xx]. As a result of his interactions with Italian anarchist leaders like Giuseppe Gribaldi and Giesuppe Fenelli, Italy and Spain had disproportionately robust, and diverse, anarchist movements within Europe, which precipitated the development of large cooperative federations.

VI. France

In France, worker cooperatives were made legal in 1848, then made illegal, and then made legal again in 1864xiv. In 1871, during the Paris Commune, workshops abandoned by their owners were taken over by the workers. By 1910 there were nearly five hundred cooperatives in France, and today there are at least seventeen hundred. Therefore, the history of cooperatives in France is uniquely characterized by the legal constraints which had to be overcome to allow for the expansion of the role of cooperatives within the economy. This could explain the fact that the level of cooperative development in France has never exceeded a purely sectoral level.

VII. The Spanish Case: Franco & Mondragón

While the formula behind Mondragón is with little doubt a promising example of an ideal cooperative model, its conception and growth were enabled by a specific set of circumstances. Mondragón was established in 1950’s Spain under the Franco dictatorship in a geographically isolated region, at a time when political rights were few and the economy was still reeling from the Spanish Civil War. After a young priest named José María Arizmendiarrieta moved to a small town in the Basque region of Spain, he set up a small technical college[xxi]. In addition to teaching job skills, Arizmendiarrieta taught the students the principles of Catholic Humanism, centered around participation and solidarity. The years that followed its establishment were marked by policies of economic liberalization that made the 1960’s in Spain he greatest period of economic growth the country has ever known. The period is aptly referred to as “the Spanish Miracle.” It is important to realize that Mondragón was born out of necessity in a failing economy characterized by a policy of autarky, in that Mondragón was simply organized by civil society to meet the needs that a constrained private market and a bloated bureaucracy could not, but then after establishing its footing, Spain entered a period of liberalization that helped Mondragón explode from the head-start position that it had unintentionally been placed. The political context that made a cooperative enterprise so appealing at the time, one in which social needs were not being met efficiently while political mobilization was a futile exercise, echoes a similar sentiment voiced a lot lately about the disconnect between political opinion at large and the likelihood legislation will or will not pass.

While the entrepreneurial component of Mondragón’s conception may not exactly be replicable, the way Mondragón has dealt with modern challenges may provide valuable insight into how a potential similar cooperative venture might deal with same problems. Despite the recession Spain had experienced in recent years, one characterized by “double-dip recession, fierce austerity and 26% unemployment[ix],” Mondragón was never anywhere near collapsing — job losses totaled to zero. There are two explanations for this, one is tied to the fundamental nature of a cooperative enterprise, the other is more specific to the organizational structure of Mondragón. One on hand all cooperatives, especially worker’s cooperatives, are more flexible in times of instability. Workers in Mondragón have elected for voluntary wage-cuts to keep everyone employed and have been reinvesting the dividends on their shares back in the company. In any cooperative model, consensus-based decision making allows for greater flexibility when facing unforeseen challenges. The other strategy utilized by Mondragón is only possible because of its corporate structure. Because Mondragón is comprised of many small and medium-sized cooperative enterprises engaged in a joint-venture, firms can loan surplus funds to each other affordably; often if one firm fails but is picked-back-up by its peers, that firm will end up returning the favor. This reflects a common theme in visions for a cooperative future; cooperative ventures are pleasant at the individual firm level, but the true potential promised by cooperatives is in the way that they can organize both horizontally and vertically with each other. The concept of ‘collusion’ among cooperatives is a non-sequitur.

VIII. The Italy Case: Mazzini, the Pope & Mussolini

The history of cooperative enterprise in Italy, at least as an idea, begins in the mid-19th century, with the efforts of Italian socialists following the Revolutions of 1848. After Italy’s reunification in 1861, the country suffered from stagnant growth and high levels of emigration. At this time, the first major strides in cooperative development were made based on the “Mazzinian” principles of Giuseppe Mazzini, a leader in Italy’s reunification who while being staunchly anticommunist, believed that “cooperatives could contribute to the gradual transformation of society through consensus within a democratic state[xxii].” Later developments were facilitated by a more direct involvement-based strategy by the Catholic church in social welfare. In Pope Leo XII’s 1891 Rerum noverum, he endorsed labor rights such as the right to a fair wage and the right to form unions, while affirming individual rights of property and free enterprise. These ideas were first put to practice with the beginning of the Young Christian Workers movement and the establishment of rural credit unions, and then later in the form of agricultural cooperatives and consumer cooperatives. This progress was all but halted during the reign of Mussolini’s Fascist government during the interwar period, when he banned unions, worker organization, and the Catholic cooperative federation “Legacoop,” despite his own intellectual interest in Syndicalism. After the second world war concluded an antifascist resistance organization called “The National Committees of Liberation” that was formed during the war helped revitalize the cooperative movement by establishing cooperative enterprises all over Northern Italyiv. Today, “Legacoop” is one of the largest cooperative federations in Italy.

Furthermore, the direct involvement of the Catholic church and the scale at which small family-owned businesses are integrated into Italy’s cooperative network reflects the same cultural values that correspond to Italy’s “Conservative” welfare state. This is further exacerbated by the fact that Italy’s Marcora law allows workers to use their unemployment insurance as capital to fund the conversion of the failed business they were fired from into a cooperative.

IX. The Argentina Case: Expanded

The history of cooperatives in Argentina is both brief and historically significant. The emergence of a cooperative movement in Argentina at the beginning of the 21st century marks the first major step taken by the international cooperative movement outside of the developed North Atlantic. This case necessitates inclusion in this essay because this cooperative movement occurred recently, or within the information era, and in a relatively developed liberal democracy.

The path that led Argentina towards economic crisis at the turn of the century begins with the military coup d’état in 1976 that brought an end to the last Argentinian dictatorship. Following this, the military established a Junta government which remained in power for six years. During this time, over 30,000 Argentines, mostly students and union activists, disappeared in a period known as “the Dirty War[xxiv].” At the same time, the military government began accepting billions of dollars in loans from the IMF in exchange for liberalizing Argentina’s markets and ending nationalistic policies, thereby setting the stage for what would become a growing dependence on the IMF.

The first presidency of the new Argentine republic began in 1983, following the exit of the Junta, but it was the election Carlos Menem in 1989 that marked the beginning of the end. This election was characterized by a feeling of hope and optimism for the future, so under Menem’s leadership Argentina instituted a series of reforms that came to be known as El Modelo (the model), based on the neoliberal policies endorsed by the IMF[xxiii]. In the first half of the 1990’s these reforms led to unprecedented increases in capital inflows and the rate of economic expansion, but Menem’s El Modelo was problematic. El Modelo entailed applying almost every single neoliberal policy idea in the IMF’s “playbook” at the same time. Almost all national assets were privatized, the currency markets were deregulated, and the national currency’s value was tied to the US Dollar. While these radical policies resulted in the GDP almost doubling, unemployment soared, corruption abounded, and the IMF continued to loan the state billions of dollars. The negative results of these policies combined with a growing national debt and the emergence of new external challenges manifested as a burden that became too great for Argentina’s fragile economy and politics to bear. In 2001, almost overnight, $40 billion dollars in cash disappeared. In the two days that followed, bank accounts were frozen, 25 people died in protests or riots, the president resigned, the state defaulted on its debts, and 50 percent of the population fell below the poverty line.

In the period that followed, protestors took to the streets in what became known as the piquetero movement, but not to protest against specific policies but instead to express their rejection of the entire system. This energy was soon directed into “neighborhood assemblies” which met to discuss new and innovative solutions to their plight. It was through meetings like these that now-unemployed factory workers came together and began taking over abandoned factories under the motto: “Unity and Strength!” Later, these worker-occupied factories would come together under the National Movement of Recuperated Factories (MNFR) with the motto: “Occupy. Resist. Produce.” Within a few years there were over 200 such factories that employ 55,000 people combined. However, the path to functionality for these worker-occupied factories was not easy. Through political action these workers were able to be allowed to buy back machinery and equipment at auction price, were made exempt from local taxes, and gained the right to use the old factory brand name. Additionally, in 2005 the left-wing government established a $2 million credit line for use by cooperatives. Even so, the legal battles fought by the factories to secure their right to exist continued even beyond this.

Even so, the cooperative movement centered on Buenos Aires has not lost its momentum. “By 2014, there were 311 occupied businesses in Argentina,” with nearly half having been established after 2004, indicating the utility of the cooperative even outside of economic crisis scenarios[xxiv]. Importantly, this post-crisis period of cooperative development was not dominated by occupied factories but has instead diversified. Now numerous cooperatives in Argentina exist in the form of “hotels … restaurants, trash collection, construction, health, education, media and transport.” The scale to which Argentina’s cooperative movement has realized its goals is the manifestation of a decade’s worth of desperation, but it is important to note these goals were realized in a favorable political environment, as most of the cooperative growth occurred under the two left-wing governments that were in control from 2002 to 2015.

X. Cooperatives in The United States

While the history of contemporary cooperatives in the United States begins in the late 19th century as outlined in the previous section, the history of economic democracy in the United States is older than its independence. Mutual Insurance companies are organized on cooperative principles, and the first mutual in what would soon be the United States was founded by Benjamin Franklin in 1752 in a response to risks of fire in Philadelphiaiv. Today, there are over 30,000 cooperatives in the United States, with a combined 350 million memberships, combined annual revenue of $515 billion, and a combined workforce of 900,000[xxv]. While scope of cooperatives is wide in that it is spread across various sectors of the economy, there is a lack of cooperative federations and a lack of cooperation and coordination between individual cooperatives, whether within one sector or across multiple sectors. This absence of organization between the various sectors of cooperatives places the United States in the sectoral level of cooperative development.

The largest cooperative sector in the United States today is mutual insurance, just as it was in 1776. Today however there are over 1,500 mutual insurance companies with $140 billion in annual revenue, 122,000 employees, and 233 million policyholders. The democratic process within mutuals is based on the principle of one policy, one vote, but many people hold more than one policy, which would explain the high number of policy holders. While agriculture is a central part of the history of cooperatives in North America, the industry employed up to 40% percent of the population in 1900, but today employs barely 2 percent. Today, there are over 2,700 agricultural cooperatives with $135 billion in annual revenue, 160,000 employees, and about 3 million members. Farm credit cooperatives, farm supply and (the aforementioned) marketing cooperatives, and biofuel cooperatives comprise these 2,700 organizations. The US department of Agriculture estimates that the cooperatives account for about one-third of agricultural inputs and sales. It is important to note that the development of agricultural cooperatives required federal legislation in addition to broad-based action by farmers. In the period described in the previous section, the late 19th and early 20th centuries, there were numerous agricultural cooperative failures due to the formidable competition presented by private competitors, failed business models, and under-financing. It wasn’t until the agricultural depression after the first World War that necessary support was gathered in Washington with the help of farm organizations (e.g., the American Farm Bureau Federation, the National Farmers Union, and the National Grange) to help push through the sort of legislation necessary to acquiesce the development of successful agricultural cooperatives.

Five major pieces of legislation were passed during this period that helped increase the number of agricultural cooperatives and their success: 1914; the Smith-Lever Act formalized the USDA’s extension system, including training and development assistance for cooperatives. 1916; the Federal Farm Loan Act provided credit to farmers and co-ops and led to the creation of the farmer credit co-ops of today. 1922; the Capper-Volstead Act permitted agricultural co-ops to coordinate their marketing without being susceptible to antitrust laws. 1926; the Cooperative Marketing Act further broadened the ability of agricultural co-ops to share information. 1929; the Agricultural Marketing Act established the Federal Farm Board and helped to strengthen and stabilize the prices of agricultural products.

Cooperative finance is the third-largest sector and refers to finance companies which exist primarily to provide capital to cooperative businesses. One example is the Federal Home-Loan Bank System, which is not only cooperatively organized but is also a government-sponsored enterprise. Farm credit cooperatives are technically cooperative finance, and many cooperative finance companies are directly involved with credit unions and rural electric.

Credit Unions make up the fourth largest sector but have the second-highest number of members — after mutual insurance — with 93 million membersiv. Most cooperative models were formed in Europe, but the credit union model was imported to the United States from Quebec. The first credit union in the United States was started by French Canadian immigrants in Manchester, New Hampshire, in 1909. In the same year, investigations led by the banking commissioner of Massachusetts into predatory money lending practices resulted in the first credit union law in the country. In 1921 a philanthropist by the name of Edward Filene (who was a supporter of the 1909 law) established the Credit Union National Extension Bureau, a private nonprofit which aimed to spur the formation of credit unions across the United States. Over the next twenty years, the number of credit unions went from 190 in 1921 to 9,200 in 1940.

The next largest sector is Rural Energy. Just as credit unions spread during the first half of the 20th century to help fill a gap left by private lenders, rural electric cooperatives spread during the same time to fill the gap left by private electric companies. However, while credit unions were relatively inexpensive to establish, rural electric cooperatives were much more capital and labor-intensive. The spread of rural electric co-ops was made possible by the Rural Electrification Act (REA) of 1936, which provided long-term loans at affordable rates. Today, these rural energy cooperatives provide energy to 42 million customers in 47 states.

Following Rural Energy is Social Service cooperatives, which provide services like healthcare and childcare. In Seattle, there exists the Group Health Cooperative which has more than 660,000 members in the greater Seattle area. In the South Bronx there is the Cooperative Home Care Associates (CHCA) which specializes in providing in-home assistance to the disabled, the elderly, and the chronically ill. There are also about 1,100 childcare co-ops across the United States[xxv].

Housing is next largest cooperative sector, with a total of 840,000 cooperative housing units in the United States. Condos are also a form of “common interest housing,” and make up about 5% of housing in the United States with co-ops making up only 1%. Housing co-ops come in three categories: market rate co-ops which are bought and sold at the prevailing market price, limited equity co-ops which subsidize the purchase of a unit, meaning that the owner of a unit is entitled to less than the market price if they decide to sell, and non-equity co-ops where residents effectively rent their units. Most non-equity co-ops are student cooperatives, of which there are a few examples in the West Campus neighborhood in Austin, such as College Houses and the Inter-Cooperative Council (ICC).

Next is Grocery and Other Consumer Goods, with an estimated 325 grocery cooperatives in the United States. Most of the larger cooperatives are part of the National Cooperative Grocers Association. Austin contains the consumer grocery cooperative called the Wheatsville Co-op. Recreational Equipment Incorporated (REI) also deserves mention as it is now the largest consumer goods cooperative in the United States.

The smallest sector on the UWCC census[xxv] was the workers cooperative. In 2007 it was estimated that there were only 220 of these co-ops in the country. The United States lacks any national legislation pertaining to workers cooperatives and in 13 states it is not even possible to organize a workers’ cooperativeiv. This helps to explain why the United States is so underdeveloped in the area of workers co-ops relative to countries like Spain with Mondragón, or Italy with its Emilia-Romagna region. Despite this there still exists numerous small independent workers’ cooperatives like the aforementioned New Era Windows in Chicago or the 4th Tap Brewing Co-op here in Austin.

Cooperatives of Businesses or Other Organizations, as well as Employee Stock-Ownership Plans (ESOPs) also deserve mentioning. Organizational cooperatives in the United States are mostly purchasing co-ops. These cooperatives are usually organized by multiple businesses within the same industry, like grocery stores or pharmacies. The Independent Pharmacy Cooperative has over 4,500 members that purchase supplies at advantageous rates so as to better compete with private chains like Walgreens or CVS. ESOPs are also common in the United States and were able to become so common after the Employee Retirement Income Security Act (ERISA) was passed in 1974, which helped create a specific framework for ESOPs as well as establish tax benefits for companies that began ESOPs.

XI. Cooperative Efficacy

The brief history of cooperatives around the world and the summary of the status of cooperatives in the United States serve in conjunction as an ideal stage from which to explore future opportunities for growth and expansion, but first it should be established that cooperatives can indeed be part of a solution to many of the ills that characterize the darker side of the global economy and the neoliberal world order. It must be made clear that cooperatives can help prevent future recessions while also protecting consumers from the effects of recessions and that cooperatives can indeed help alleviate wealth and income inequality.

The causes of recessions and the ability for institutions to survive recessions is primarily an issue of incentives, so the fact that the incentives structure of cooperatives is unlike those of private institutions indicates a difference in how cooperatives might play a role in or be affected by recessions. In cooperatives, the fact that “compensation is shared among partners or owners…keeps incentives aligned[xxvi].” Additionally, compensation is variable, which allows cooperatives more flexibility regarding payroll. These factors make cooperatives more robust in times of economic instability, as indicated by the fact that “worker-owned businesses were, on average, better at maintaining their fiscal health during the last recession.” The Great Recession of 2008 was caused by the bundling of subprime mortgages so as to be an appealing high-margin investment, while the recession of the late 1980’s and 1990’s was partially the result of speculative investing by savings and loan companies. Private capital is incentivized to maximize short term growth and profits, which is why private institutions invest in risky high-margin investments. Cooperatives are primarily motivated by providing services to members, and prioritize long term sustainability over short term gain, so they are much less likely to engage in risky high-margin investment like bundled subprime mortgages, or to create unrealistic expectations for investments. While we cannot forcibly cooperativize financial institutions, we can expand the role of mutual insurance and credit unions while helping them to organize with cooperative finance to provide a degree of financial autonomy independent from for-profit private financial institutions. When the Great Recession hit in 2008 most mutual funds survived relatively unscathed, but some of the funds failed because they had indirectly invested in subprime mortgage bundles through their secondary financial institutionsiv. The FHLB, which is cooperatively organized, was able to navigate through the Great Recession despite their entrenchment in mortgages, with all 12 regional cooperative banks experiencing minimal difficulties. Serving as a stark contrast, the for-profit Fannie Mae and Freddie Mac suffered devastating losses during this time. In addition to this, the fact that a cooperative is primarily focused on the people it employs and serves, economic downturns don’t necessarily translate to layoffs or outsourcing as outside investors do not decide the future of the company. The stock market affects all businesses, but cooperatives are shielded from much its characteristic instability and unpredictability by their unique ownership model.

While cooperative ownership structure entails a straightforward strategy for the reduction of wealth inequality, the compensation structure within cooperatives helps explain how they could contribute to a reduction in income inequality. According to the Federation of Protestant Welfare Agencies (FPWA) report “Worker Cooperatives for New York City: A Vision for Addressing Income Inequality[xxvii],” the pay ratio within cooperative organizations is generally 3:1 to 5:1, while in traditional corporations it is as high as 600:1, and the minimum pay offered by cooperatives is generally higher than the same jobs at similar private companies in the same area. The report also states that in the CHCA, which was mentioned in the Social Service paragraph of the previous section, approximately 82 percent of all revenue goes back to its employees, while other homecare agencies generally operate at 60 percent. They are also mostly full-time, with benefits.

In conjunction with the fact that cooperatives are more equipped to adapt to and survive economic recessions, “giving workers a direct stake in managing production enables a business to operate more effectively[xxviii],” according to research synthesized by Virginie Perotin of Leeds University Business School. Perotin’s research also showed that despite the fact that cooperative conversion often dominates cooperative discourse as a way to salvage failed firms, from 1997 to 2001 more than 8 in 10 of cooperative startups in France were examples of cooperative entrepreneurship. There were also more cooperative startups overall than conventional startups, and Perotin also highlighted that “in several industries conventional firms would produce more with their current levels of employment and capital if they adopted the employee-owned firms’ way of organizing.” Cooperatives indeed display lower fail-rates than contemporary business startups. According to the report Benefits and Impacts of Cooperatives[xxix], about cooperatives fail at a rate of 10 percent in the first year compared to 60 to 80 percent of traditional businesses, and about 90 percent of cooperatives, compared to 3 to 5 percent of traditional businesses, are still operating 5 years after startup.

While financial sustainability is a key component of cooperatives’ long term business strategy, the primacy of a cooperative’s commitment to social good implies a predisposition for operating sustainably as it pertains to the natural environment as well. This values-based and principle driven organizational structure means cooperatives are “by nature a sustainable and participatory form of business[xxx].” The International Labor Organization report entitled Cooperatives and the Sustainable Development Goals also outlines how most newly established energy cooperatives in the UK and Germany are focused on renewable energy[xxix]. Cooperatives are also viable in providing access to sustainable water and sanitation. The largest urban water cooperative in the world, SAGUAPAC of Santa Cruz, Bolivia, provides water to over 1.2 million people while maintaining one of the purest water quality measures in Latin America[xxxi]. Beyond water, cooperatives show a unique potential for realizing a future with sustainable management of other natural resources, like forestry. In Indonesia, a country plagued by deforestation, forestry cooperatives have been established that “promote sustainable use of tropical hardwood,” and they have managed to receive certification from the Forest Stewardship Council (FSC)[xxxii].

XII. A Cooperative Future

The Argentina case served as an example of what a modern cooperative movement would like on a large scale. Much of the history of cooperatives precedes the end of the Cold War, so the Argentina case is useful by allowing one to witness the viability of a cooperative movement within the information-driven neoliberal world order. Even so, when conceptualizing a vision for a cooperative future, what has been accomplished in Argentina is far from that ideal. In order for cooperatives to compete on a global scale, cooperatives “need to achieve growth in scale” and “reposition themselves into higher value-added economic activities along their respective supply chains[xxxiii].” Within American cooperative discourses, ambitions for the future often point to the Mondragón Corporation, as it resembles an American corporation in its management structure. While the Mondragón Corporation has achieved growth in scale and met the prerequisites for competitiveness on a global scale, it was determined in the case study of Spain’s workers’ cooperative corporation that the context within which it was able to grow and thrive was incredibly unique; not able to be replicated. It would be more in-touch with the reality of our current economic paradigm to look to the complicated interwoven network of cooperative federations in Italy’s Emilia-Romagna region, which displays very high value-added economic activities in respective supply chains, as well as an unprecedented scale of organization. The Argentina case shows that a cooperative movement can arise from economic collapse and functionally materialize as a wave of cooperative conversion, but here in the United States, we already have a plethora of cooperatives across the country in various sectors. How can we transition from this sectoral level of cooperative development to an integrated level, like Italy?

As previously mentioned, the United States is characterized by an imbalanced public policy environment across state lines. In some states it can be near-impossible to establish a workers’ cooperative because the policy structure is lacking a legal path to do so. So first, there should be a focus on creating a consistent and favorable public policy environment across state borders, realized through political action. However, in order to garner the amount of support required to exercise effective political action, awareness and education concerning cooperatives needs to be expanded. Then, in order to encourage the formation of more heavily integrated cooperative federations, one should look to the Italian law that requires cooperative enterprises to contribute a portion of their profits to a federation of their choice. While coordination between cooperative organizations and cooperative startups, whether entrepreneurial or conversion-based, would be enabled by such a law to independently allocate the necessary funding for the expansion of cooperatives, public policy designed to encourage both cooperative entrepreneurship and cooperative conversion is required in areas where cooperative organizational structure is underdeveloped. Such public policy innovations would also be applicable to countries outside the United States like Argentina, France, Spain, and the UK, where cooperatives have infiltrated various business sectors but have yet to reach a level of organizational development to match Italy’s integrated level.

XIII. Beyond Rural Electric

Americans pay too much for internet[xxxiv], especially in hard-to-reach rural communities. The number and reach of rural electric cooperatives in the United States has potential to serve as a foundation upon which new rural public service cooperatives could be established. Access to internet in rural areas is often far behind access in urban areas, contributing to a pattern of “Bright Flight[xxxv],” which refers to young technology-oriented professionals moving from rural areas to the city. The existing rural electric cooperatives have already displayed potential for expansion into broadband services, as studied in a recent CoBank report[xxxvi]. By expanding the role of rural cooperative ISPs, rural communities could be drawn closer to revitalization. The federal loan program that provided the funds necessary for the rural electric startups in the early 20th century could be replicated in order to achieve such a goal. Such a loan program would likely be much more affordable than the original electric startup fund, as it would entail an expansion of services offered by an existing firm, but if the political challenge proves too great in congress, a similar loan program could be offered at the state level as well.

In addition to expanding rural electric cooperatives into internet service, rural water cooperatives could also be established. Rural water cooperatives could work directly with farmers to provide grey water recycling services to reduce the environmental impact of irrigation, while promoting overall sustainability. The existing energy cooperatives could also be aided by affordable loan programs to expand investment in sustainable energy. Such a program could work in conjunction with the prevalence of wind farms on private property to help individual landowners sell the energy produced on their land collectively, through a producer cooperative. Coordination between rural public service cooperatives and rural agricultural cooperatives would provide and extra dimension to the cooperative integration described in the next section.

Emulation of the rural electric development model in the form of rural internet could reduce prices, increase quality, and increase availability while keeping the associated wealth within local communities. What would be more challenging is translating the hypothetical combined rural electric and rural internet model to an urban context, as many areas have real or virtual electric and internet monopolies. Perhaps if such cooperatives were established on the fringes of major urban areas, in suburbs and other newer developments, they could creep towards the urban center by outcompeting nearby providers in terms of price. Additionally, electrical cooperatives could work with individual homeowners or rural farmers to acquiesce the conversion to renewable energy by integrating their operations with urban workers’ cooperatives that produce solar panels, tankless water-heating systems, and perhaps wind turbines.

XIV. Agriculture and Consumer-Cooperatives

The status of grocery-related consumer cooperatives in the United States is significantly underdeveloped. Despite a cultural obsession with ‘farm-to-table’ restaurants and ‘locally sourced’ produce, consumer cooperatives in the form of grocery stores are still heavily overshadowed by corporate supermarkets. In order to create integrated cooperative networks and increase the competitiveness of cooperative grocery stores in urban and rural contexts, supply chain connections must be made between the sizeable cooperative agriculture sector and the far spread and isolated cooperative grocery chains across the country.

One innovation that plays a role in the cooperative economy in Austin, Texas is the “Yard to Market Co-op,” a marketing cooperative that helps small urban gardeners sell their outputs collectively. Our local cooperative grocery store is “Wheatsville Co-op” with only two locations. Connections must be made between urban farming marketing cooperatives and local grocery cooperatives. From there, grocery cooperative chains of a sufficient size should establish cooperative bakeries to source their baked goods. Every major metropolitan area could have one or more cooperative grocery chains, and the focus on locally sourced produce should be enough to support integration between these cooperatives and the local urban farming communities.

However, this does not yet entail a supply-chain connection between the producers, whether agricultural cooperatives or otherwise, and the consumers, except in the case of urban farmers, which would be unable to serve more than a minor role. Ties must also be created between these consumer cooperatives and local cooperative wineries or breweries (e.g., 4th Tap in Austin, TX). Beyond that, regional organization could serve to focus the cooperative agriculture presence in the region by providing them with privileged access to consumer markets, and by coordinating marketing activities. Once a sufficient level of integration has been established, the consumer cooperative component can invest back into agriculture, so as to spurn further expansion of the role of agricultural cooperatives in the region.

Beyond this, the UK’s consumer wholesale society knows as “The Co-operative Group,” should serve as the ideal model for consumer cooperative integration beyond metropolitan contexts. While the CWS in the UK encompasses nearly the entire country, the country’s size suggests that the prospect of replicating the same organizational model for consumer cooperatives in the United States might be more realistic at a regional level.

XV. Cooperative Childcare

Over twenty years ago, a successful hotel entrepreneur by the name of Harris Rosen decided to invest in the poor crime-ridden community of Tangelo Park, Florida. Having grown up in poverty himself, Rosen wanted to help this community where nearly half of its high school students dropped out. To do so he invested over $11 million over a period of over 21 years in childcare and scholarships. Since then, crime has plummeted, graduation rates are high, and nearly all graduates end up going to college[xxxvii].

While the scenario in this town would be challenging to replicate, it does connect with some dominant themes of feminist discourses in international development; improving the lives of mothers will significantly contribute to lifting people out of poverty. Free or affordable childcare allows mothers to find work while providing structure and healthy, safe spaces to children. The benefits the mother is able to receive through work are then passed on to the children, and the children are set on a path towards success as they enter public school. By investing in urban childcare cooperatives through urban public policy or investing in rural childcare cooperatives through legislation at the state or federal level, overall quality of life can be improved while reducing poverty in all the communities which childcare cooperatives serve.

Before leaving office, President Barack Obama shared plans to make preschool public[xxxviii]. If a public preschool bill managed to become law, it could be combined with a program aimed to spurn the development of cooperative daycare in conjunction, which would massively ease the financial burden on low-income families. President Obama’s efforts before leaving office have already expanded access to quality preschool, but there is still work yet to be done.

XVI. Mutual Insurance

In the insurance industry, mutual insurance companies already make up a large part of the market. Even so, there remains opportunities to expand their role in the economy. By rewriting the tax code to provide specific tax incentives that encourage mutual insurance companies to adopt more democratic ownership and management structures, insurance mutuals can be made more democratic, more affordable, and less dependent on private capital. Through coordination with cooperative organizations, insurance mutuals could expand their role in health insurance. While there already exists health cooperatives (e.g., the Group Health Cooperative of Seattle), these are centralized in urban areas and involve providing direct medical care at a local level. Mutual insurance companies, regarding their role as a participant in a larger cooperative economy, could be most effective at a state level by working with cooperative organizations to help them pool their resources together in order to provide health insurance for all their employees at a lower cost. State governments could also establish mutual health insurance organizations for their teachers or other types of state employees with the intention of cutting costs for both themselves and their employees, or labour unions could organize such entities for their own members as well.

XVII. Public Policy

In the three previous sections, I addressed certain specific possibilities for the expansion of cooperatives. Each section concerned a minor component of what could become an integrated network of cooperatives at a metropolitan and regional level, like the Italy case. However, even if these individual components were achieved, which would be unlikely without further organizational development as a prerequisite, this would not amount to a realization of the Italian integrated vision. Solid cooperative federations need to be established at the urban level before significant strides in cooperative organizational development can be made beyond that. In order to achieve the formation of such federations, there must first be a sufficient foundation of established cooperatives in an area to comprise such an organization.

A little over two years ago, the city of New York implemented a $1.2 million Worker Cooperative Business Development Initiative (WCBDI). Barely over a year after the program began, a report[xxxix] was released that announced that 21 new worker cooperatives had been created in NYC, nearly doubling their number. Most of the money from the program was invested directly into the cooperative startups, but some of it was also funneled into the Community and Economic Development Clinic at the CUNY, which provided legal assistance to the startups. Portions of the money also went to organizations like Green Worker Cooperatives, an organization that helps establish worker-owned green businesses. They were responsible for 6 of the startups. The largest grant was given to The Working World (TWW), the same organization that provided the funding for New Era Windows in Chicago and that helped fund cooperative takeovers in Argentina. This funding also helped TWW provide a loan for the cooperativization of a grocery store in Brooklyn. Only a few months after this report was released, WCBDI announced that 19 more cooperative startups were on the way[xl].

Through city-driven cooperative investment programs, the foundations could be set for larger cooperative networks in the future. Not only can city-spawned investments help directly fund cooperative startups; they can be partially allocated to private organizations as well. Some of these private organization might distribute their operational/investment activities over a large geographic area. The Working World (TWW) received funds from the New York city government to help invest inside the city, but TWW has been active in other parts of the country and the world. By investing in its own local community through an organization that works elsewhere as well, a cooperative development fund can have a measurable effect on the impact such organizations are able to make outside of the local urban community. Hypothetically, if more cities like New York began investing in programs like the WCBDI, and they allocated their funds according to a similar pattern that included NGO’s like TWW, the total sum of these organizations impact — purely outside of these urban areas — would be multiplied far beyond the nominal investments. Once major metropolitan areas are able to establish a sizeable community of cooperative enterprises, like a near-future New York City, a replication of the Italian law that requires cooperatives to invest a portion of their profits into a federation of their choice could help spawn the creation of large cooperative federations that will be able to continue to grow and expand on their own.

Before leaving office, Barack Obama not only outline a plan for public preschool, but outlined a plan to make community colleges tuition-free as well[xli]. Such a program would be made more effective if paired with expansions in apprenticeships and technical training. If community colleges were made free and the quality and variety of programs they offered was sufficiently broadened, legislation could prioritize working with cooperative businesses and could help spread the availability of education regarding the establishment and running of cooperatives. These programs could serve as a direct pipeline sending young skilled laborers with cooperative management skills directly into cooperative organizations.

We often hear pundits on news shows talk about the ‘urban-rural divide’ and the economic struggles being endured by rural America. Such difficulties could not only be eased through rural public service, childcare, and agricultural cooperatives, but a rural cooperative conversion fund could be established that provided affordable loans to individuals who want to convert a business whose owners are looking to sell into a cooperative. I already mentioned earlier in this essay how rural small businesses usually have trouble finding real sellers, and this could be the solution. While cooperative entrepreneurship is a much riskier endeavor in a rural context due to the lack of resources available to assist in the startup process (like those that were associated with the NYC program), a loan program like this could prioritize already-successful businesses to ensure efficacy and ROI.

XVIII. Findings

Before exploring strategies for implementing a cooperative vision, it was necessary to explore the current state of cooperatives around the world. Analysis showed that cooperatives exist in almost every business sector, but typically dominate sectors which are more defined by social need. This means that cooperatives typically predominated industries like healthcare, grocery, agriculture, and public services, but were typically absent from industries like luxury goods. Additionally, it was found that individual cooperatives are rarely very large, due to the fact that their democratic management style generally requires them to focus their activities in one area. It was discovered this meant that in order for cooperatives to have a significant impact on a community, they had to coordinate and organize themselves into large complex organizations comprised of federations and other organizational units integrated and coordinating across sectors. It was then necessary to explore the factors that allowed different types of cooperatives around the world to reach their level of development. From there, replicable cooperative strategies were derived from these successful cooperative scenarios to compose a realistic path towards an expansion in the economic role of cooperatives. Once the efficacy of cooperatives in combating inequality, promoting sustainability, countering recessions, and competing in a global economy was established, it was determined that the complex and intertwined network of cooperatives that characterizes Northern Italy embodied an ideal level of cooperative development at a regional level, while the scale of the organizational structure comprised by UK retail cooperatives served as an ideal model for state-level organization. The geography of cooperatives revealed a social policy-defined pattern suggesting that cooperative development shows the most promise in Western Europe, Central Europe, and the Americas.

Conclusion

Capital now wields a disproportionate amount of control over the political process, which amounts to nothing less than the colonization of the political sphere by the economic sphere. In the United States, like most modern liberal democracies, democracy is “confined to the political sphere[vi],” which is distinct from the economic sphere. With the lion’s share of power within the undemocratic economic sphere becoming increasingly concentrated among a small group, the fissure between public and private interests will only worsen.

The neoliberal world order — in its current form — has materialized through economic liberalization on a large scale. It has also become associated with rising wealth inequality, unsustainable business practices, and imminent economic recessions. However, the inequalizing effects of this economic paradigm, this concentration of wealth in the hands of a few, serves as the central contributing factor behind most of the other observable problems that characterize our global economic system. This is explained by the fact that the contemporary business model is investor owned. Because the management and incentives structures reflect the interests of the stakeholders, the primary incentive driving investor-owned businesses embodies the investor mindset: profit, or return-on-investment in the form of short-term gains. Transferring ownership to the workers would align the management and incentives structure of an organization with the interests of the people who comprise said organization (essentially a process of democratization). In this business model, sustainability and efficiency would be central to its incentives structure. Therefore, expanding the role of cooperatives would amount to a democratization of the economic sphere — a peaceful, incrementalistic revolution. Unless the incentive structure is flipped, and the economic sphere is democratized so that social interests are made to coincide with productive interests, private capital will not cease in its attempts to reconcile this disparity.

Recommendations

Cooperative enterprises organize production democratically, unlike capitalist enterprises. Therefore, replacing traditional capitalist enterprises with cooperative enterprises would contribute to the democratization of the economic sphere. Expanding the role of cooperatives in the United States would help reconcile the disparity between the vox populi, and the interests of private capital. As outlined previously, the Emilia-Romagna region of Italy where cooperatives “produce a third of its GDP[xvii]” contains the highest level of cooperative development in the world. This is because large networks of cooperative federations, like Legacoop, facilitate coordination between cooperatives across various productive sectors, including workers cooperatives. The impressive number of cooperatives in the United States, found within various economic sectors, could serve as the foundation upon which a level of cooperative development comparable to that of Italy could be achieved, even though workers coops make up a small minority.

In the same way legislation like the 1922 Capper-Volstead Act permitted agricultural coops in the United States to coordinate their marketing without being susceptible to anti-trust laws, or the 1936 Rural Electrification Act (REA) made the spread of rural electric coops possible, the notable level of cooperative development in Italy was achieved within a favorable public policy environment. The 1947 Basevi Law “allowed co-operatives to transfer the totality of their surpluses to a reserve[xlii],” the 1985 Marcora Law[xliii] allowed workers to use their unemployment insurance as capital to fund the conversion of failed businesses to cooperatives, and Law 59 required cooperative enterprises to contribute a portion of their profits to a federation of their choice[xliv]. If the United States produced a legal environment similarly conducive to the expansion of cooperatives, a greater level of cooperative development could be achieved.

Legislation should be proposed to encourage the development of complimentary, cross-sectoral networks of cooperatives that provide financial support. Requiring cooperatives to contribute a portion of their surpluses to umbrella funds like federations, and making surpluses exempt from corporate tax, will facilitate the expansion of coops already established in various economic sectors within the United States. Legislation designed to help workers raise the funds necessary to convert failed businesses to cooperatives, like the Marcora law, or public programs designed to encourage cooperative startups, like New York City’s successful $1.2 million Worker Cooperative Business Development Initiative[xl] (WCBDI), should also be considered.

Endnotes

[i] Brigevich, Anna. (2008). The Post-Cold War Wave of Democratization: Regime Transitions in Sub-Saharan Africa and Postcommunist States Compared. University of North Carolina at Chapel Hill.

[ii] Fukuyama, Francis. (1992). The End of History and the Last Man. Free Press.

[iii] Garcia, Frank. (2017). ‘’Globalization, Inequality, and International Economic Law’’. Religions, 8(5).

[iv] Nadeau, E. G. (2012). The Cooperative Solution. University of Wisconsin — Madison.

[v] Salinger, James M. (2004). ‘’Climate Variability and Change: Past, Present, and Future — An Overview’’. National Institute of Water and Atmospheric Research.

[vi] Varoufakis, Yanis. (2015). Capitalism will eat democracy — — unless we speak up. TEDGlobal>Geneva.

[vii] International Cooperative Alliance.

[viii] Artz, G., & Kim, Y. (2011). Business Ownership by Workers: Are Worker Cooperatives a Viable Option? (Working Paper №11020), Department of Economics, Iowa State University.

[ix] Tremlett, Giles. (2013). Mondragon: Spain’s giant co-operative where times are hard but few go bust. The Guardian.

[x] The Working World (TWW). See https://www.theworkingworld.org/us/

[xi] Definition of ‘syndicalism.’ The Merriam-Webster Dictionary.

[xii] Adams, Frank., & Hansen, Gary. (1993). Putting Democracy to Work: A Practical Guide for Starting and Managing Worker-Owned Businesses. Berrett-Koehler Publishers, Inc, San Francisco, CA.

[xiii] The Co-operative Group. Our History.

[xiv] Draperi, Jean-François. (2015). Cooperatives in France: Issues and challenges at the start of the 21st century. Revue international de l’economie social.

[xv] Mondragon Corporation. (2012). Annual Report 2012.

[xvi] Olson, Deborah G. Emilia Romagna — cooperation between co-ops, family-owned businesses and local government. Deborah Groban Olson, Attorney at Law, PLLC, ESOP Law.

[xvii] Duda, John. (2016). The Italian Region Where Co-ops Produce a Third of Its GDP. Yes! magazine.

[xviii] The Ontario Cooperative Association. The History of Cooperatives.

[xix] Esping-Andersen, Gosta. (1990). The Three Worlds of Welfare Capitalism. Princeton University Press.

[xx] Bookchin, Murray. (1998). The Spanish Anarchists: The Heroic Years, 1868–1936. AK Press.

[xxi] Foote, William (1991). Making Mondragón. IRL Press.

[xxii] Ammirato, Piero. (2018). The Growth of Italian Cooperatives: Innovation, Resilience and Social Responsibility. Routledge.

[xxiii] Vieta, Marcelo. (2012). Workers Self-Management in Argentina: Contesting Neo-Liberalism by Occupying Companies, Creating Cooperatives, and Recuperating Autogestión. Historical Materialism Book Series, 199. Koninklijke Brill NV, Leiden, The Netherlands.

[xxiv] Caistor-Arendar, Ana., & Kennard, Matt. (2016). Occupy Buenos Aires: the workers’ movement that transformed a city and inspired the world. The Guardian.

[xxv] University of Wisconsin Center for Cooperatives. (2009). Research on the Economic Impact of Cooperatives (REIC).

[xxvi] Brodwin, David. (2013). We Need More Employee-Owned Businesses. U.S. News.

[xxvii] Federation of Protestant Welfare Agencies (FPWA). (2014). Worker Cooperatives for New York City: A Vision for Addressing Income Inequality.

[xxviii] Chen, Michelle. (2016). Worker Cooperatives Are More Productive Than Normal Companies. The Nation.

[xxix] Nembhard, Jessica G. (2014). Benefits and Impacts of Cooperatives. White Paper.

[xxx] International Labor Organization. Cooperatives and the Sustainable Development Goals.

[xxxi] Stories.coop. (2012). Clean Water, Cooperative Principles.

[xxxii] Stories.coop. (2013). A Source for Sustainable Teak.

[xxxiii] Division for Social Policy and Development Department of Economic and Social Affairs. (2003). Supportive Environment for Cooperatives: A Stakeholder Dialogue on Definitions, Prerequisites and Process of Creation. United Nations.

[xxxiv] Yi, Hannah. (2015). This is how Internet speed and price in the U.S. compares to the rest of the world. PBS News Hour.

[xxxv] Petras, Chuck. (2016). Expanding the Role of Rural Electric Cooperatives to Provide Broadband to their Members. LinkedIn Pulse.

[xxxvi] Buckley, Sean. (2017). Electric cooperatives take active role in expanding rural broadband, study says.

[xxxvii] Alvarez, Lizette. (2015). One Man’s Millions Turn a Community in Florida Around. New York Times.

[xxxviii] Press Office. (2016). Obama Administration Investments in Early Learning Have Led to Thousands More Children Enrolled in High-Quality Preschool. U.S. Department of Education.

[xxxix] NYC Small Business Services. (2015). Working Together: A Report on the First Year of the Worker Cooperative Business Development Initiative.

[xl] Abello, Oscar. (2016). NYC Set to Triple Number of Worker Cooperatives. Next City.

[xli] Field, K., Basken, P., & Read, B. (2016). What Obama’s 2017 Budget Means for Higher Ed. The Chronicle of Higher Education.

[xlii] Co-operative Housing International. (n.d.). About Italy: History.

[xliii] De Berardinis, Camillo. (2015). The Marcora Law: an effective tool of active employment policy. Co-op News.

[xliv] Zamagni, Vera. (2016). Learning from Emilia Romagna’s cooperative economy. The Next System Project.