The Foundation for Creating a Democratized Economy begins with People Controlling their Employment
Summarized by Kevin Zeese
This session on cooperatives was part of the economic democracy track of the Democracy Convention. The session was held on August 26, 2011. It featured Rebecca Kembler, Ole Olson and Gar Alperovitz. Their biographies and contact information are at the end of the summary.
Finance capitalism is collapsing. We are seeing the failure of corporate capitalism as we have seen the failure of state-socialism. With the wealthiest 400 Americans having as much wealth as 150 million Americans, we are living in the equivalent of Medieval Times. We need to ask ourselves what it is we want and then find the path to it.
There is a lot of experimentation going on regarding worker ownership, democracy in the work place and sharing in the profits of corporations. A huge amount of various forms of ownership are being developed as people look for alternatives to the current, failing system. This session focuses on the cooperative as one of those alternatives. The United Nations has declared 2012 as the year of the cooperative so there will be a lot of attention to co-ops in the coming year.
Cooperatives are becoming more and more common in the United States. There are 120 million Americans who are members of some types of co-ops, most commonly credit unions. Another widely shared experience is joint-ownership is Employee Stock Ownership Plans (ESOPs) which give employees ownership of companies through stocks, while these do not usually include management by employees they do provide a share of the profit. There are more than 13 million people who are part of ESOPs – meaning there are more employee stock owners than there are members of private unions. Worker-owned co-ops go further and give workers a say in the management of the company. Worker owned co-ops are at the cutting edge of democratizing the economy and provide some of what we need to transform the economy.
A cooperative association is an entity that is owned and controlled by its members. It operates for the benefits of its members and it is controlled by these members in a democratic way. There are consumer co-operatives for food, energy and other services, housing co-ops, electricity co-ops, agriculture and producer co-ops as well as worker-owned co-operatives. Human being are the basic element of co-ops, humans working in co-operation to meet economic, social and cultural needs. The National Cooperative Business Association represents all co-ops in the United States.
A worker cooperative is a business that is owned and controlled by the people who work in it. The members of the cooperative are the worker-owners of the business. Workers own the business together and usually invest with a buy-in amount of money when they begin working or have worked for the company for a specified time. At the end of the year worker-owners are paid a portion of the money the business makes after expenses. This is known as the profit of a traditional company, and the surplus of a co-op. The U.S. Federation of Worker Cooperatives works to support and expand worker-owned businesses in the United States.
The two central characteristics of worker cooperatives are:
(1) Workers invest in and own the business, and
(2) Decision making is democratic, generally adhering to the principle of one worker, one vote.
Democratic decision making does not mean that every decision is made by all worker-owners. Each worker-owned business creates a structure that works best for their business. This has resulted in a wide variety of democratic approaches and some very sophisticated decision-making practices. The size and type of business are critical factors in determining the model that works best. Some democratic decision making approaches include:
- An elected board of directors
- Elected managers
- No management at all
- Decisions made by consensus
- Decisions made by majority vote
- Any combination of the above
Cooperative values, agreed on principles that have developed over 200 years of co-op experience are the principles by which cooperatives put their values into practice include:
Voluntary and Open Membership: Co-ops are voluntary organizations open to all persons able to use their services and willing to accept the responsibilities of membership, without gender, social, racial, political or religious discrimination.
Democratic Member Control: Cooperatives are democratic organizations controlled by their members, who actively participate in setting their policies and making decisions. Men and women serving as elected representatives are accountable to the membership.
Member Economic Participation: Members contribute equitably to, and democratically control the capital of their cooperative. At least part of that capital is usually the common property of the cooperative. Members usually receive limited compensation, if any, on capital subscribed as a condition of membership. Members allocate surpluses for any or all of the following purposes: developing their cooperative, possibly setting up reserves, part of which at least would be indivisible; benefitting members in proposition to their transactions with the cooperative; and supporting other activities approved by their membership.
Autonomy and Independence: Cooperatives are autonomous, self-help organizations controlled by their members. If they enter into agreements with other organizations, including governments, or raise capital from external sources, they do so on terms that ensure democratic control by their members and maintain their cooperative economy.
Education, Training and Information: Cooperatives provide education and training for their members, elected representatives, managers, and employees so they can contribute effectively to the development of their cooperatives. They inform the general public – particularly, young people and opinion leaders – about the nature and benefits of cooperation.
Cooperation among Cooperatives: Cooperatives serve their members most effectively and strengthen the cooperative movement by working together through local, national, regional and international structures.
Concern for Community: Cooperatives work for the sustainable development of their communities through policies approved by their members.
The most developed cooperative system in the world is the Mondragon Cooperative movement in the Basque Region of Spain. The Mondragon management model has at its center education, followed by sovereignty of labor. Outside of these two center circles are: the instrumental and subordinated nature of capital, wage solidarity, participatory management, open admission and democratic organization. The outside circle includes social transformation, inter-cooperative work and universal nature.
Mondragon has developed so that it has power in government as well as economic power in the Basque Region. Mondragon shows how it is possible to build a non-capitalist system inside a capitalist system during this transition time to a new economy. Mondragon is providing employment for 83,859 people working in 256 companies in four areas of activity: Finance, Industry, Retail and Knowledge. They have their own social security, education and other systems. They had minimal losses in the economic collapse because they built up their own communities rather than making risky outside investments. They know they are not perfect, but have developed a quality of life where there is not a huge gap between wealth, less need for police and less crime.
Mondragon is very sexy right now and there is an enormous amount it can teach. But it came out of an intense cultural situation,a fascist government where thousands lost their lives and was consolidated around Catholicism. We can learn from it but it is not a straight line to develop in the U.S., i.e. Mondragon cannot be just dropped into the United States because the circumstances and culture are different. There are other models to learn from as well especially in Quebec, Argentina and Venezuela.
In Madison, WI there are nine active co-ops within five miles of the capitol, 450 people are employed in these co-ops, $25 to $30 million in business is conducted by them annually and over half the cooperatives are 30 years old. Madison co-ops are linked together by MadWorC. There are a variety of types of companies that are members of MadWorC including a bakery, taxicabs, coffee companies, a pharmacy, engineering company, a printer, technology company and interpreters. These co-ops are almost invisible as people do not realize they are dealing with a co-op as they are just like any other business.
Isthmus engineering and manufacturing, where Ole Olson is a worker-owner is unusual in the co-op world as there are only a few manufacturing cooperatives in the country. Isthmus builds custom machines, was established in 1980, has fifty employees, and has $10 to $15 million in annual sales. Isthmus makes a wide range of products – light industrial, auto, solar, medical and consumer machines. Fifty percent of their workers are worker-owner. You are allowed to buy in to Isthmus after working there for two years. Once you buy in you have an equal voice to everyone else. All member-owners sit on the board. The executive committee is elected annually. The board makes all administrative decisions, not project decisions which are made by a project committee. The sales manager and general manager are not allowed to be owners but report to board.
There is a complex of worker cooperatives that are developing in Cleveland known as Evergreen. The Democracy Collaborative is seeking to develop similar models in other cities. Evergreen is aimed at community building not just developing a co-op. Companies are important but the goal is community building in the university circle area of Cleveland. This is very poor, mostly black community with 40% unemployment and a median income of $18,500. A key part of developing Evergreen is using big universities and hospitals in the area as anchors. These anchors purchase $3 billion annually but none in their university circle community. Each of these anchors has a lot of public money linked to them and therefore they can be pushed to support the building of the community.
The Evergreen Cooperatives are committed to local, worker-owner job creation, being sustainable, green, and democratic workplaces; as well as economic development of the community. It was started by the Cleveland Foundation, City of Cleveland and the Democracy Collaborative. The co-ops include the Evergreen Cooperative Laundry, Ohio Cooperative Solar, Green City Growers Cooperative and Neighborhood Voice. The co-ops cannot be sold because the goal is build the community. The capitalist model will throw away whole cities when no longer needed, e.g. Detroit. By building this network of cooperatives they are building for the long-term this allows for planning, long-term, which is critical to creating sustainable communities.
Connecting this complex of co-ops is a nonprofit organization that determines the expansion of co-op complex. They have created a revolving fund managed by the non-profit, 10% of that fund goes back into the community to start more co-ops.
The basic notion is to rebuild the community, drawing on the purchasing power of big institutions through worker-owned companies. The people building the cooperatives take people in the community, business leaders and from the anchor institutions to Mondragon to show them the potential and raise their vision. Worker-owned companies have no ideological viewpoint of liberal or conservative, they are just practical. It comes out of a desire to change the system in positive, practical ways and creating models that other cities can use and build on. Cooperatives are a part answer to changing the system to a more democratized economy.
Cooperatives could be a lynchpin of a democratized economy because they give employees greater control of the foundation of their economic lives, their jobs. While these are all very small scale co-ops, there is a great deal that has been learned and now people can teach others how to develop cooperatives. This was not true just a few years ago. From these experiences, we will learn how to build a model over time that can change the economic system. This could be the path to take us beyond capitalism and state socialism and create the kind of culture of community that can reshape the economy.
Community Wealth, a project of the Democracy Collaborative
Gar Alperovitz is the Lionel R. Bauman Professor of Political Economy at the University of Maryland. He is one of the founding principals of The Democracy Collaborative. He is also one of the founders of the Committee for the Political Economy of the Good Society (PEGS). Dr. Alperovitz also serves as President of the National Center for Economic and Security Alternatives. Previously he was a Fellow of King’s College at Cambridge University, a founding Fellow of the Institute of Politics at Harvard University, a Fellow of the Institute for Policy Studies, a Guest Scholar at the Brookings Institution, and a Guest Professor at Notre Dame University. He has also served as a Legislative Director in the U.S. House of Representatives and the U.S. Senate, and as a Special Assistant in the Department of State. Earlier he was President of the Center for Community Economic Development, Co-Director of The Cambridge Institute, and President of the Center for the Study of Public Policy. Dr Alperovitz was a Marshall Scholar and a Guggenheim Fellow; and was one of five specially designated Phi Beta Kappa Fellows selected at the time of the national bicentennial commemoration. Contact: firstname.lastname@example.org
Ole Olson is a member-owner with Isthmus Engineering & Manufacturing, A Worker Owned Cooperative, employs 50 people that designs and builds custom automated machines. Their 68,000 foot building was built with green techniques. Contact: email@example.com
Rebecca Kemble A worker owner of Union Cab Co-Op and currently serves as the president of the U.S. Federation of Worker Co-operatives. Contact firstname.lastname@example.org