For the Many, Not the Few: A Closer Look at Worker Cooperatives

After pointing out the authoritarian hierarchy of the capitalist workplace—the capitalist chief at the top wielding ultimate decision-making power and owning the wealth created by the workers—John Stuart Mill envisioned instead the “association of laborers themselves on terms of equality, collectively owning the capital with which they carry on their operations, and working under managers elected and removable by themselves.”[1]

Socialistic worker cooperatives are the humane alternative to capitalist businesses. In a worker cooperative, you become a company owner soon after being hired. All workers share equal ownership of the firm, from custodian to spokesperson. This translates to equality in power (all decisions are made democratically) and in wealth (company shares and incomes are the same for everyone). Just like that, the exploitation of labor by and authoritarian power of the greedy few are consigned to the dustbin of history, replaced by cooperation, equity, and democracy. Workers control their own destinies, deciding together how they should use the profits created by their collective labor, be it improving production through technology, taking home bigger incomes, opening a new facility, hiring a new worker, lowering the price of a service, producing something new, and all other conceivable matters of business.

With the disappearance of hierarchy and exploitation comes the elimination or great alleviation of other crimes of capitalism we’ve explored. When worker-owners invest in new technologies that increase productivity and require less human labor, they won’t fire themselves—they can make more money and/or work fewer hours, bettering their standard of living and spending more time with family or doing things they enjoy. They will not outsource their own jobs to Bangladesh, either. Their greater wealth will reduce poverty, their greater purchasing power easing the throes of recession and depression (as would less competition, were cooperatives to federate). If co-ops were adopted on a national or global scale, the stock market might disappear, or at least substantially change, as the workers might want to keep all the shares of their company. Transparency and democracy should make a firm less likely to commit the kinds of profit-driven abuses against people, planet, and peace, because there are more players influencing decisions; the wider the field, the less likely everyone would feel comfortable with, say, poisoning our biosphere to make a buck. This is not to say that laws prohibiting the production of vehicles that run on fossil fuels would be unnecessary. They would. Rather, it is simply to say there would be more room for dissent in a workplace and a greater chance of a more moral or safe alternative being adopted. Socialism is not a cure for all our problems, just many of them.

Some criticisms of worker cooperatives can be easily dismissed with simple philosophical and theoretical arguments. There’s the desire of capitalists and would-be capitalists to have all the power and hoard the wealth. Well, this is about being more ethical than that, having the empathy to support the common good, not selfish ends. As Dr. King said, “True compassion is more than flinging a coin to a beggar; it comes to see that an edifice which produces beggars needs restructuring.”[2] There’s the consternation at the thought of a majority of workers with little to no experience with a task overruling a worker with experience and knowledge of said task. What does the graphic designer know of welding processes and how to best use or improve them? How can we let younger, newer, brasher salespeople make policy for the veteran salesperson? Well, first, it’s important to acknowledge that both fresh blood and odd ideas from outside a field can at times prove beneficial, a spark of innovation and positive change. Second, many worker cooperatives make it a point to train all workers in multiple or all areas of the business, lessening the knowledge gap with education, training, and staff development. Some even rotate jobs! (On-the-job training and shared knowledge is a key factor for success in co-ops where most founders have no business experience.[3]) Third, a cooperative environment encourages workers to listen carefully to those with greater experience, knowing that deference will be reciprocated later. Fourth, most business decisions, if found to be ineffective or harmful, can be reversed before a total collapse of the company, just like in business today. Lastly, even if a shortsighted, unknowledgeable majority ran the cooperative—their cooperative—into the ground because they stubbornly refused to listen to the wisdom of the experts, there is nevertheless something satisfactory about the democratic nature of this failure. Under capitalism, the stupidity of a single capitalist can destroy a business, wiping out jobs for everyone. Under socialism, the workers democratically determine their own destiny. It may be a disaster, but it’s your disaster, collectively speaking. But, as we will see, cooperatives are in no way more likely to fold.

Cooperative work is as old as humanity itself, as we have seen. Worker cooperatives in their modern form have existed around the world since the Industrial Revolution began and capitalism took off, that is, before Marx’s writings.

The U.S. has a rich history of cooperative enterprises that continues to this day.[4] No, they are not always perfect. While some exemplify precisely the socialist vision, others could be more egalitarian or democratic (for example, many make use of elected managers or executives with slightly larger salaries, which can be easier with larger companies; others are too slow at granting ownership rights). But they are all a giant step up from capitalist firms. The U.S. has an estimated 300-400 cooperatives, everything from the 4th Tap Brewing Co-Op in Texas to Catamount Solar in Vermont, employing 7,000 workers (the average size is 50 people) and earning $400 million in revenue each year. (If you’ve heard it’s more like tens of thousands of cooperatives making billions, such inflated numbers are only possible by including credit unions, “purchasing co-ops,” independent farmers aiding each other through “producer co-ops,” Employee Stock Ownership Plans, and other structures that, while valuable, don’t exactly qualify.) 26% of them used to be capitalist-structured businesses.[5] Converting is a great way to preserve a business and protect people’s livelihoods; when small business capitalists retire, the vast majority of the time they do not find a buyer nor are able to pass ownership on to family, so the enterprise simply ends and workers are thrown out.[6] Cooperatives represent all economic sectors, and have annual profit margins comparable to top-down businesses—the idea that they are less efficient is a myth (not that efficiency has to be more important than democracy and equality anyway). 84% of the workers are owners at a given time.[7] Many firms are members of the U.S. Federation of Worker Cooperatives, a growing organization. Because people are put before profits, most cooperatives have a particular focus on community improvement and development, for example the Evergreen Cooperatives in Ohio. One study found food co-ops reinvest more money from each dollar in the local economy.[8]

America’s largest co-op, the Cooperative Home Care Associates in New York, has grown to 2,300 employees, about half of which are owners (to become an owner one pays $1,000 in installments). It is 90% owned by minority women. With $64 million in profits in 2013, the CHCA provides wages of $16 an hour (twice the market rate), a highest- to lowest-paid worker ratio of 11:1, flexible hours, and good insurance. Its governing board is elected; profits are shared. The company has a turnover rate that is a quarter of the industry standard. Some workers left behind minimum wage jobs and are now making $25 an hour. People say they stay because the co-op lifted them out of poverty and as owners they have decision-making power.[9] Ralph Waldo Emerson wrote in The Conduct of Life (1860), “The socialism of our day has done good service in setting men to thinking how certain civilizing benefits, now only enjoyed by the opulent, can be enjoyed by all.”[10] People who join the Women’s Action to Gain Economic Security (WAGES) co-ops in California see their incomes skyrocket 70-80%.[11]

As one might expect, workers are more invested in a company when they are also owners, which translates into better business outcomes. Though they are not without challenges, a review of the extant research reveals co-ops have the same or greater productivity and profitability than conventional businesses, and tend to last longer; workers are more motivated, satisfied, and enjoy greater benefits and pay (with no evidence of increased shirking), information flow improves, and resignations and layoffs decline.[12] They are more resilient during economic crises.[13] Many studies come from Europe, where cooperatives are more widespread and more data has been collected. In Canada, worker cooperatives last on average four times longer than traditional businesses.[14] Their survival rates are 20-30% better.[15] Research on France’s cooperatives revealed that worker-owned enterprises were more productive and efficient, and over a four-year period cooperative startups actually outnumbered capitalistic startups.[16] French capitalist-turned-cooperative businesses have better survival rates than capitalist businesses by significant margins, 10-30%.[17] Analyzing cooperatives across the U.K., Canada, Israel, France, and Uruguay, one study found that cooperatives had similar survival rates to traditional businesses over the long term, but better chances of making it through the crucial early years. Italy and Germany experience the same.[18] Italian co-ops are 40% more likely to survive their first three years; Canadian co-ops about 30% more likely in the first five years and 25% more likely in the first ten years; in the U.K., twice as many cooperatives survive the first five years than traditional firms.[19] In Italy’s Emilia Romagna region, an economic powerhouse of that nation and Europe, two-thirds of residents belong to worker cooperatives.[20] In Spain, a study of a retail chain that has both top-down stores and cooperative ones revealed the latter have much stronger sales growth because worker-owners have decision-making power and a financial stake.[21] In the U.S., much research has been done on businesses with Employee Stock Ownership Plans, which are called “employee-owned” because employees are given stock, but most are not democratic nor totally owned by the workers (Publix and Hy-Vee are examples). ESOPs are only one-third as likely to fail compared to publicly traded businesses, suffer less employee turnover, and are more productive.[22] One rare study on American plywood worker cooperatives found they were 6-14% more efficient in terms of output than conventional mills.[23] When the economy declined, conventional mills attacked worker hours and employment, whereas the worker-owners agreed to lower their pay to protect hours and jobs.[24] Given the benefits of worker cooperatives, places like New York City, California, and Cleveland are investing in their development, recognizing their ability to lift people out of poverty and thus strengthen a consumer economy, plus offer an opportunity to focus on alleviating systemic barriers to work and wealth that minorities, former felons, and others face in the United States.[25] This is no small matter. The egalitarian structure and spirit of solidarity inherent in co-ops can help win equality for the oppressed and disadvantaged. While perfect by no means, women tend to have more equitable pay and access to more prestigious positions in co-ops.[26] 60% of worker-owners in new American co-ops in 2012 and 2013 were people of color.[27] 90% of worker-owners at one of Spain’s co-ops are people with disabilities.[28] Italian cooperatives are more likely to hire folks who have been unemployed for long periods, often a major barrier to work.[29]

Spain has one of the strongest cooperative enterprises, no surprise to those who know Spain’s Marxist history.[30] (In the 1930s, George Orwell marveled at Barcelona, writing that his visit “was the first time that I had ever been in a town where the working class was in the saddle. Practically every building of any size had been seized by the workers… Every shop and cafe had been collectivized… Waiters and shop-walkers looked you in the face and treated you as an equal.”[31]) Mondragon Cooperative Corporation is a federation of over one hundred socialistic workplaces around the globe and in many economic sectors, from retail to agriculture. It is one of Spain’s largest corporations and the largest cooperative experiment in the world, with over $10 billion in annual revenue and 74,000 workers. Those who are worker-owners have shares of the business and the ability to run for a spot in the General Assembly, the federation’s democratic body of power, which elects a Governing Council. However, each cooperative is semi-autonomous, having its own, smaller democratic body. The manager-worker pay ratio is capped at 6:1.[32] In rough economic times, worker-owners decide democratically how much their pay should be reduced or how many fewer hours they should work, and managers take the biggest hits. This stabilizes an entity during recession, avoiding layoffs. So does job rotation and retraining. Further, Mondragon has the ability, as a federation, to transfer workers or wealth from successful cooperatives to ones that are struggling.[33] Due to these flexibilities, Mondragon cooperatives going out of business is nearly unheard of. When it does happen, the federation finds work for the unlucky workers at other member co-ops.[34] During the Great Recession, Mondragon’s number of workers held steady, and the Spanish county where it is headquartered was one of the least troubled.[35] The enterprise, however, has major faults. It actually owns more subsidiary companies than cooperatives—capitalistic, exploitive businesses in poor countries where workers are not owners. Also egregious: less than half of all Mondragon employees are actually owners.[36] Nevertheless, the business is a step in the right direction, indicating socialistic workplaces can function large-scale. (In fact, on average co-ops tend to have more employees that top-down firms.[37]) Mondragon is a member of the International Co-operative Alliance, the leading global association for the movement.

There are 11.1 million worker-owners worldwide.[38] When we include folk who work for cooperatives but are not owners, our total rises to 27 million.

 

Notes

[1] Mill, Principles of Political Economy

[2] King, “Beyond Vietnam,” April 4, 1967, New York City Riverside Church

[3] http://www.aciamericas.coop/IMG/pdf/CWCF_Canadian_SSHRC_Paper_16-6-2010_fnl.pdf

[4] Curl, For All the People

[5] http://institute.coop/what-worker-cooperative

[6] http://www.sfchronicle.com/business/article/Employee-ownership-may-help-businesses-stay-open-10941974.php

[7] http://institute.coop/sites/default/files/resources/State_of_the_sector_0.pdf

[8] https://tcf.org/content/report/reducing-economic-inequality-democratic-worker-ownership/

[9] http://www.commondreams.org/views/2014/08/15/how-americas-largest-worker-owned-co-op-lifts-people-out-poverty

[10] Emerson, The Conduct of Life

[11] https://tcf.org/content/report/reducing-economic-inequality-democratic-worker-ownership/

[12] https://lib.dr.iastate.edu/cgi/viewcontent.cgi?article=1098&context=econ_las_workingpapers; https://tcf.org/content/report/reducing-economic-inequality-democratic-worker-ownership/

[13] http://storre.stir.ac.uk/handle/1893/3255#.Wm-XeJM-fsE; https://tcf.org/content/report/reducing-economic-inequality-democratic-worker-ownership/

[14] http://inthesetimes.com/article/17061/a_co_op_state_of_mind

[15] http://www.co-oplaw.org/special-topics/worker-cooperatives-performance-and-success-factors/

[16] https://www.thenation.com/article/worker-cooperatives-are-more-productive-than-normal-companies/

[17] http://www.co-oplaw.org/special-topics/worker-cooperatives-performance-and-success-factors/

[18] http://www.co-oplaw.org/special-topics/worker-cooperatives-performance-and-success-factors/

[19] https://tcf.org/content/report/reducing-economic-inequality-democratic-worker-ownership/

[20] https://tcf.org/content/report/reducing-economic-inequality-democratic-worker-ownership/

[21] https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1849466

[22] http://www.co-oplaw.org/special-topics/worker-cooperatives-performance-and-success-factors/

[23] https://lib.dr.iastate.edu/cgi/viewcontent.cgi?article=1098&context=econ_las_workingpapers

[24] https://books.google.com/books?hl=en&lr=&id=5qcPK0MuCXQC&oi=fnd&pg=PA462&dq=%22worker+cooperatives%22&ots=rVtg5rB4Fs&sig=6OXh-j6-MTTcrYJgbIgcvvrgma4#v=onepage&q=%22worker%20cooperatives%22&f=false

[25] https://www.thenation.com/article/worker-cooperatives-are-more-productive-than-normal-companies/; https://apolitical.co/solution_article/clevelands-cooperatives-giving-ex-offenders-fresh-start/; https://www.thenation.com/article/meet-the-radical-workers-cooperative-growing-in-the-heart-of-the-deep-south/

[26] http://www.geo.coop/node/615; https://www.thenews.coop/119294/sector/worker-coops/co-operatives-ensuring-no-one-left-behind/

[27] https://tcf.org/content/report/reducing-economic-inequality-democratic-worker-ownership/

[28] https://www.thenews.coop/119294/sector/worker-coops/co-operatives-ensuring-no-one-left-behind/

[29] https://lib.dr.iastate.edu/cgi/viewcontent.cgi?article=1098&context=econ_las_workingpapers

[30] https://gsgriffin.com/2017/07/03/socialismo-the-marxist-victories-in-spain/

[31] Orwell, “Homage to Catalonia”

[32] http://www.yesmagazine.org/new-economy/world-s-largest-federation-of-worker-owned-co-operatives-mondragon-josu-ugarte

[33] https://www.theguardian.com/world/2013/mar/07/mondragon-spains-giant-cooperative; Putting Democracy to Work, by Frank Adams and Gary Hansen, p. 145

[34] http://www.yesmagazine.org/new-economy/world-s-largest-federation-of-worker-owned-co-operatives-mondragon-josu-ugarte

[35] http://www.northeastern.edu/econpress/2016/11/16/mondragon-economic-democracy-in-the-startup-age/; https://www.theguardian.com/world/2013/mar/07/mondragon-spains-giant-cooperative

[36] http://www.northeastern.edu/econpress/2016/11/16/mondragon-economic-democracy-in-the-startup-age/; https://www.theguardian.com/world/2013/mar/07/mondragon-spains-giant-cooperative

[37] https://poseidon01.ssrn.com/delivery.php?ID=630093101127024071122112080068014068031053050050057049071105017072103089077103089094028058042052005023061081018000001123015079014012043035035115110105126071030118028095082080068011004095110081113065023069089126092123117096125095075072112084120095119024&EXT=pdf

[38] http://www.cicopa.coop/Second-Global-Report-on.html (p. 25, Table 1). If we add in people who are self-employed but members of “producer cooperatives” that support them (farmers and fishermen, for instance, especially in Asia), 280 million people are involved in cooperative employment. Bringing these workers into the analysis would also swell the U.S. numbers mentioned earlier.

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