PREPARATION:
Objectives of Module 7:
- To understand how unemployment impacts people.
- To understand how cooperatives work.
- To understand how to start a successful cooperative.
Check Your Understanding:
At the end of this module, you should be able to explain the following concepts:
- How do economists define unemployment and underemployment?
- What is a cooperative?
- How many people in the world are members of co-ops? How many work for co-ops?
- What are the three requirements for co-ops to be successful?
- What are the benefits of a cooperative market economy?
- Why do co-ops hold a competitive advantage over both private and public enterprises?
- How do worker co-ops function?
- What are credit unions; how many are there in the world?
- How do co-ops benefit the community where they are?
- How do you start a successful co-op?
CIRCLE TIME:
Excitement Sharing:
“What is something good that has happened in your life since we last met? Or would anyone like to read from your journal or share your recent activities?”
The Social Reality: Unemployment
Economists everywhere have an odd way of defining unemployment. In the United States, the unemployed are defined as people who are without jobs and who have actively looked for work within the past four weeks. Economists do not count the chronically unemployed who have given up hope and stopped looking. They also don’t count those who are child-rearing, are taking care of relatives, are ill, or are in school. They do not take into account people who are underemployed, for example, those who only have part-time or temporary work. Finally, they do not note whether the wages paid for work are enough to survive―many low-paid employees need two or even three jobs to support their families.
In the United States, unemployment among African-American youth is at 50 percent, much higher than in the general public (Elejalde-Ruiz 2018).
Among the 19,000 Lakota people on the Pine Ridge Indian Reservation, unemployment was 89 percent (Re-Member 2018). Many communities, regions, and even countribases are suffering economic depression.
Anyone in the world who wants to work but cannot find a full time job that pays a living wage is facing economic depression. The loss of a job is not merely the loss of a paycheck, but it is also the loss of a routine, security, sense of self-worth, and connection to other people. Those who have been looking for work for six months or longer are more than three times as likely to become depressed as those who are employed in steady jobs. Feelings of shame, embarrassment, and strains in family relations are common.
Many people feel it’s their fault if they cannot find a job. Why? Meaningful work is a human right. It is society’s duty to provide an honest, meaningful job with an ample wage for each person who wants it. We should fight to demand jobs for all.
The Social Reality Discussion Question: Unemployment
Our question now is: What is your opinion about unemployment? How does it impact you? How does it make you feel?
We will go around the room, and ask everyone to say briefly what your opinion is about unemployment, and how it makes you feel. Please speak for just one minute each.
[After everyone has spoken, 10-15 minutes] Now let’s shift our focus, because, as usual in this course, we want to focus on the solutions.
Cooperative Games – Cooperative Competition:
This is done in pairs, face-to-face. One person stands with one foot forward and the other back; the partner touches their toes to the toes of the first person. Hold the hands in front of the shoulders, the right palm of the first person against the left palm of the partner, and match the other hands the same way. Then the two players push as hard as they can against each other in slow motion. Try to match one’s strength with the strength of the partner, never allowing the partner to lose their balance and fall.
Variation: Stand back-to-back, feet apart, leaning against each other. Gradually, never breaking back contact, walk your feet in tiny steps away from each other until you are finally sitting back to back on the floor. Then walk yourselves back into a standing position.
Seesaw variation: “Sit on the floor facing your partner, with legs apart, knees bent. Your feet should be flat on the floor and near your partner’s feet. Grab your partner’s arms, not the hands. Then, like a cooperative seesaw, one starts to rise, pulled up by the other, and then starts to lower, pulling the partner up. You will always be part way up, like a seesaw.
At the end, “This is called cooperative competition because everyone is playing quite hard, and yet not trying to beat their opponent. Runners often find they run farther and faster when they have a somewhat evenly matched partner to practice with. Have you ever experienced a type of cooperative competition; if so, how did it feel?
“Did everyone act responsibly toward others in this game?
“Trust means to feel safe with, confident in and supported by the group. How much do you feel trust in this group?” [15 minutes.]
Prout’s Vision: Cooperatives
Throughout the twentieth century and until today, cooperatives have been mostly invisible, ignored by most economists, the mass media and political leaders who are more concerned with power, fame and control. Yet more than one billion people, a sixth of our global population, are members of co-ops. The world’s largest non-governmental organization is the International Cooperative Alliance (ICA), representing 246 national and global organizations.
The ICA defines co-ops thus: “A cooperative is 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.”
Co-ops employ almost 10 percent of all of the world’s employed people. In 156 countries, at least 280 million people are employed in or within the scope of co-ops. This is much more than the 80 million employed by multinational corporations (ICA 2018).
In Europe, there are at least 25,000 worker co-ops in Italy, about 17,000 (employing some 210,000 people) in Spain, 2,600 (employing 51,000 people) in France and about 500 to 600 in the UK (Pérotin 2016).
Cooperatives are also more likely to succeed than privately-owned enterprises. In the United States, 60 to 80 percent of companies fail in their first year, while only 10 percent of co-ops fail during that period. After five years, only three to five percent of new U.S. corporations are still in business, while nearly 90 percent of co-ops remain viable (World Council of Credit Unions 2003).
According to Prout, it is a basic right of workers in an economic democracy to own and manage their enterprises through collective management. Industry, trade, agriculture, and banking should all be organized through producer and consumer co-ops. These will produce the minimum necessities and most other products and services. Co-ops form the largest sector of a Prout economy. Smaller satellite co-ops can serve larger co-ops. For example, an automotive co-op could produce parts that are then shipped to nearby car manufacturing plants for final assembly.
There are three requirements for co-ops to succeed. The first is honest, trustworthy management. A high degree of integrity is vital to the firm’s effectiveness. The second requirement is strict and transparent accounting to build trust among the co-op members and the community. The third requirement is for the local public to accept the cooperative system. This requires public education and constant promotion to create integrated networks of community co-ops.
Global capitalism, which wipes out local businesses around the world, also puts unfair pressure on co-ops. Decentralized economic democracy, however, ensures that each person in the community has a job and a voice in the decision-making process.
A cooperative market economy has many benefits: it keeps consumer prices low, decreases inflation, ensures low prices for raw materials, aids in the fair distribution of wealth, fosters closer ties among people, and builds community spirit.
Worker Cooperatives
Thriving co-ops grow from the energy and commitment of local people. The basis of the cooperative system lies in “coordinated cooperation,” in which free human beings with equal rights and mutual respect work together to fulfill a common need, for their mutual benefit.
Co-ops differ from both traditional private enterprises and socialist communes formed through forced collectivization. Both of these systems are run through “subordinated cooperation,” in which managers supervise and give orders to the workers. Co-ops, on the other hand, combine economic and social goals, spreading wealth and power to each member equally.
Co-ops hold a competitive advantage over both private and public enterprises because members have a personal interest in their co-op’s success. The members own the co-op, so are more likely to buy its goods and use its services. Shares in co-ops are not publicly traded because the members own the shares. They themselves decide how to spend the co-op’s profits.
Today many co-ops in capitalist countries involve pooling investment money and then sharing the profit. In Prout, only cooperative banks and consumer co-ops function like this. In all other co-ops, each member actively works for the project. This leads to a better working climate and enhanced productivity. In such co-ops, labor employs capital instead of the reverse. With labor at the helm and no longer subject to the dictates of capital, a sense of self-worth is restored to people and the community is strengthened.
Also in contrast to capitalism, co-op productivity is measured not only in terms of output and income, but also in terms of job security and happiness.
How Worker Cooperatives Function
Membership in a worker co-op is open only to those who work there. New workers are hired on a trial basis before they become full members. The control of the firm and the right to any residual assets and profits are based on the work of members rather than the value of capital or property holdings.
Control rests on the principle of one member, one vote, and not on the number of shares or amount of a person’s investment in the co-op. If non-worker shareholders were allowed to become members, it would start conflicts of interest that could dilute the worker incentive system. Financing can be accepted only if it does not have the power to influence decision-making.
The incentive system for pay and profit-sharing must be both fair and attractive, so that competent people will join. While some co-ops pay all workers the same, others reward workers’ performances according to their skill and contribution, but within a minimum and maximum income range. The ratio between the lowest-paid and highest-paid workers is figured with regard to the time and place, but the difference will naturally decrease as the overall standard of living rises. Rewards may also be given in other forms that boost productivity and worker satisfaction, such as better equipment, education and training, putting more workers in a unit, and work-related travel grants.
In private enterprises, financial incentives are used to demand high standards of training. Yet in co-ops, even higher levels of resourcefulness, social skills, and discipline among workers are needed. The value of investing in constant worker training to foster social skills as well as business management expertise cannot be stressed too much. Each member should be urged to further his or her education, keep abreast of technological advances in the field, and to share knowledge with others. The members’ ability to play bigger roles in the venture will increase, and along with it, their self-esteem. In this way, cooperation and working conditions will improve for everyone.
Sharing of cooperative values and the sincere attempt to practice them allows people to integrate their social and economic lives with their beliefs. This can lead to a deeper sense of worker satisfaction, loyalty, and commitment to economic democracy.
The degree of collective decision-making depends on the size of the co-op. In small collectives, all members jointly make key decisions. Larger co-ops elect boards to make policy decisions. Boards select a manager who is a member of the co-op to be in charge of day-to-day operations. Each co-op, according to the realities of its business, must decide which decisions the manager, the board, and the entire membership respectively will make. Guidelines are based on other co-ops’ experience.
Coordinated cooperation requires members and managers to have mutual respect and trust for one another. It is important to teach cooperative ethics to workers so that they can participate in and manage their firms. Where co-ops have been most successful, the managers are also teachers, stirring in the workers an understanding of the co-op and how it functions.
The Mondragon Corporation is the largest federation of worker co-ops based in the Basque region of Spain. It has more than 80,000 co-op worker-members. Their model of collective ownership relies on a balance of incentives. The innovative system of internal capital accounts spreads gains or losses in the net worth of the co-op to individual workers’ accounts. The co-op restricts workers from taking out their balances at will, so that it can use the assets for reinvestment in the co-op. Interest is paid annually on each account. The balances on each member’s account are paid out after a designated period of time, such as five years, or when a worker leaves the co-op.
Without good leadership and a wise cooperative structure, workers sometimes make poor decisions. For example, in the Vakhrusheva Coal Mine in the Khabarovsk Region of the Russian Far East, workers preferred instant dividends, high wages and access to imported goods as opposed to reinvesting their profits back into the development and long-term future of the co-op. Today this mine is being worked by a privately-owned company (Perkins).
Co-ops provide greater job security than do private enterprises, which are not answerable to the community and whose boards might choose to relocate to where wages are lower. Co-ops deem labor as a fixed rather than a variable cost over the short run. This means that workers are not immediately laid off if production is cut back. Viable alternatives to layoffs include cutting the work hours of all members, starting new lines of production or services, retraining workers, and transferring members to other co-ops.
A Supportive Infrastructure
It is difficult in a capitalist economy for a co-op to survive as an isolated enterprise. As Sarkar has noted, sincere acceptance of the cooperative system by the public is a requirement for success.
The vast majority of co-ops are fairly small. The only way they can afford certain services is through mutual support. Together, several co-ops may form a supportive infrastructure. This framework includes financing, technical and management assistance, joint marketing, joint purchasing of supplies and services, research and development of new products, cooperative education and training, and lobbying and public relations services. When co-ops have access to these types of support, they often outperform conventional private firms.
Access to funding from an allied credit union or bank is crucial to success. In the Mondragón group of co-ops, the Caja Laboral Cooperative Bank has provided the capital financing needed to grow and overcome many difficulties. It has 2,261 member-employees and generates annual revenue in excess of €330 million (Bloomberg 2018). The Stiga independent consulting report for 2009 rated Caja Laboral first among 105 financial institutions in Spain in terms of excellence of service (Mondragon Corporation Annual Report 2009).
Credit unions are cooperative banks, owned and democratically-managed by their members, which give loans at lower interest rates than commercial banks. Today there are 68,000 credit unions in 109 countries that serve 235 million people with $1.7 trillion in assets (World Council of Credit Unions 2016).
There are several reasons why credit unions are more successful than corporate banks. First, because they are legally registered as not-for-profit co-ops, earnings are not given away to stockholder investors. Second, credit unions do not speculate with their money on risky financial investments. Third, credit unions in the United States have been exempt from taxes since 1937, because they are member-owned, democratically operated, with the specific mission of meeting the credit and savings needs of consumers of modest means. Fourth, the members of the board of directors of each credit union are volunteers. Finally, credit unions are people helping people, working hard through education and community service to benefit everyone.
Worker and community takeovers of failed capitalist ventures have great potential. Argentina has the largest number of these takeovers; in response to the country’s 2001 economic crisis, workers occupied bankrupt factories and collectively managed them. Called the Fábricas Recuperadas Movement, which means “reclaimed or recovered factories,” this tactic expanded to other enterprises, such as the Hotel Bauen in Buenos Aires. The communities came out to defend these initiatives whenever the police tried to evict the workers.
The reclaimed businesses are run cooperatively, with key management decisions taken democratically by a general assembly of the workers. In most of these ventures, all workers receive the same wage. By 2016, about 16,000 Argentine workers were running 367 recovered businesses. In the first year since conservative president Mauricio Macri took office in December 2015, six recovered enterprises have failed. In Brazil in 2005, there were a total of 174 enterprises that had been taken over and were being managed by the workers as part of the solidarity economy (Juvenal 2006).
The benefits of worker-management include a higher level of loyalty and commitment by the workers, greater support from the community and less financial responsibility and stress on the shoulders of a single owner or CEO. The greatest obstacles faced are sometimes internal disputes and often problems getting credit for operations, because commercial banks are wary of lending to new cooperatively-managed enterprises, especially those with a history of financial troubles. In Argentina, recovered factories found it easier to join forces with other worker-managed enterprises to reach a critical size and power, which enabled them to negotiate successfully with the banks.
Co-ops have great potential to expand economic opportunity and wealth building for poor communities. In 2008 a group of community organizers in mainly African-American neighborhoods of Cleveland, Ohio, started the Evergreen Cooperative Initiative to create jobs and wealth building through a network of ecologically-friendly, community-based co-ops. In an area known as Greater University Circle where 43,000 residents have a median household income below $18,500 and where over 25 percent of the working population is unemployed, they used the Mondragón Cooperative Experience as a model to create a network of worker-owned enterprises. A non-profit corporation ties them together, with a revolving fund so that 10 percent of the income produced is used to start new co-ops (Wang 2011).
The Green City Growers Co-op is a year-round, hydroponic food production greenhouse. On just two hectares of land (5.5 acres), 40 employee-owners produce three million heads of healthy, organic lettuce and 300,000 pounds of herbs each year for local markets. The Evergreen Cooperative Laundry is an industrial-scale, high-tech laundry with more than 150 workers that uses only a third of the water and heat of traditional laundries to service the hospitals and the nursing homes in the area (Democracy Collaborative 2018). Ohio Cooperative Solar employs workers who “face barriers to employment” to install solar panels on Cleveland-area institutional, governmental, and commercial buildings. The enterprise became profitable within its first five months in operation; in the off-season the co-op helps weatherize low-income housing in the area. These co-ops focus on economic inclusion and building a local economy from the ground up (Wang 2011).
Co-ops benefit the community at large by creating jobs, retaining wealth, and by increasing social connections among the local people. The practice of economic democracy in co-ops raises awareness of democratic issues in the wider community.
Co-ops, much more than corporations, closely reflect the lives and thoughts of the member-owners. If the common interests of the members and the interests of the co-op move apart, the co-op dies.
Community Benefits
Full employment is possible by starting co-ops. This is especially crucial for women, who have been exploited by men throughout history because they were not economically independent. Jobless people everywhere can create co-ops that will earn them a decent income.
Co-ops benefit a community in many ways. They bring people together, encourage them to use their diverse skills and talents, and provide them with an opportunity to develop new capabilities. They strengthen the community by creating a sense of belonging, fostering close relationships among different types of people, and empowering people to make decisions to develop their community.
On an economic level, co-ops foster regional economic self-reliance and independence from outside control, empowering local people. They create employment, circulate money within the community, and offer a wide range of goods and services. Because co-ops are owned by the members themselves, profits stay in the local area. Co-ops thus increase the wealth and build the strength of the community.
In essence, successful cooperatives transform a community by establishing economic democracy. Co-ops are the businesses of the future. With global capitalism fatally ill, starting co-ops makes a lot of sense.
Prout’s Vision Discussion Questions:
“Cooperatives are the businesses of the future.” Do you agree with this? Why or why not?
Have you ever visited or worked in a co-op? What impressed you most?
What factors do you think are most important for a co-op to be successful? Why?
If there was a credit union where you could keep your money instead of a commercial bank, would you use it?
Do you think your community would benefit if it had more co-ops? Why or why not?
Activist Tools: How to Start a Successful Cooperative
In 1844, in the mill town of Rochdale near Manchester, England, 26 poor workers started the modern cooperative movement with a food co-op. Here are five principles as to how the lives of ordinary people could be improved:
- Start with the most essential products: When the first cooperative shop opened in Rochdale, there were only four items for sale: flour, butter, sugar, and oatmeal. As the business grew, they gradually added other foods, books, and magazines.
- Produce and sell things within your own community: This means making things that low-income people need and use. Consider basic foods, furniture, shoes, a taxi service, housing, and banking services.
- Allow people of all religious or political views: The co-operators agreed to let people discuss any question at their meetings, but the organization itself would be neutral.
- Use some resources for education: From the very start, the pioneers put part of their profits into an educational fund. In Rochdale, the first co-op started a library, while the Mondragón group of co-ops, which began in Spain about 100 years later, started with a technical engineering school.
- Share the profits: Members of the co-op paid in a weekly sum of two pence, which later rose to three. However, these payments made them the owners of the shop and they received money back, five percent interest on the money plus their share of any profit the shop made.
Laws concerning co-ops are different in every country. In fact, some laws were written to hinder and block co-ops. Those who wish to start a co-op should first consult their national association of cooperatives and visit successful co-ops. It would be ideal to visit those which operate in the same sector, to learn as much as possible from the experience of others. These experienced co-op workers can also advise about psychological ways to win the support of the local people.
Here are suggestions on how to start a successful co-op:
- Fulfill a need. People have to come together in order to fulfill a real need in the community. No matter how good the idea, if there is not a community need, the enterprise will not succeed.
- Start a founding group. A few committed people have to take on the duty to develop the initial idea through to inception. Usually, however, one person will need to provide the leadership.
- Commit to a vision. Commit to the ideals and values implicit in co-ops, and try to ensure that both the members and the management are honest, dedicated and competent.
- Conduct a feasibility study. Objectively evaluate the perceived need, and decide if the proposed venture can fulfill that need by doing a feasibility study.
- Set out clear aims and objectives. The members of each enterprise must formulate clear aims and objectives through consensus. These will help direct everything from the founding group’s initial focus to promotional strategies in the years to come.
- Create a sound business plan. Since the venture will require capital, members will have to manage co-op finances efficiently, and make effective decisions about loan repayments and profit sharing.
- Ensure the support and involvement of the members. The members own the enterprise—at every step their support and involvement are essential.
- Establish a location. Secure adequate premises for the venture, in the best possible location in the community.
- Get skilled management. From within the community, bring into the venture people who have the needed management, business, financial, legal, and accounting skills.
- Continue education and training. Ideally, the members will have the skills—chiefly the communication and interpersonal skills—needed to run the venture successfully. If not, they will either have to develop such skills or bring in new members who have them.
Activist Tools Exercise: Create a Co-op!
Brainstorm together and make a list of goods and services that are needed in your community that a co-op might provide. Consider basic necessities, transportation, agriculture and agricultural products, expensive imported goods that could be produced locally, cleaning, consulting, computer services, pest control, etc.
Next, choose any product or service from your list to collectively consider. How many members would ideally begin this co-op? What kind of location would be needed to start? What materials and inventory would be needed to start? What competitive advantages would your product or service have in the market? How much money would be needed at the beginning, and when could you expect to start making a profit? What is your plan for growth? What sources might provide the funding you need? How many jobs could your co-op eventually provide?
Closure:
The facilitator should remind everyone about further viewings, readings, and activities – Do as many as you can. Ask everyone to read the next module in the manual before the next meeting. Confirm the date, time, and place of the next meeting. Show the following roles for the next module and ask people to volunteer to lead a part.
MODULE 8: FOOD FOR ALL
Facilitator: _______
Timekeeper: _______
Excitement Sharing: _______ (10 min.) 0:00
The Social Reality: Hunger – review and lead discussion question: _______ (15 min.) 0:10
Cooperative Game – When Will Hunger, Poverty and War End?: _______ (15 min.) 0:25
Prout’s Vision: A Crisis in Agriculture, Food Sovereignty – review and lead discussion question: _______ (15 min.) 0:40
Prout’s Vision: Prout’s Agrarian Revolution, Agricultural Cooperatives, Ideal Farming, Permaculture, Ecovillages, and Transition Towns – review and lead discussion question: _______ (15 min.) 0:55
Activist Tools: Capturing Media Attention – review: _______ (15 min.) 1:10
Activist Tools Exercise: Plan a Media Event: _______ (20 min.) 1:25
Closure, Feedback, Role Assignments for Next Week: _______ (15 min.) 1:45
Ask participants to write anonymous feedback about the session before they leave. They can use the Feedback Form at the end of Module 1, or write whatever they like.
Activities—Do as many as you can:
What is the official unemployment level as defined by the government? What is the real unemployment level? How many people are unemployed? Are some demographic groups experiencing more unemployment than others?
Interview an unemployed person. How long have they been without a job? How do they survive? How do they feel about being unemployed?
Visit a co-op and interview one of the workers. Ask about their history, the problems they face, the mistakes they have made, and their successes. Ask how many workers are members, how much they are paid, and any other monetary, social, and personal benefits they receive.
Contact the national association of co-ops in your country. What is the total number of co-ops in your country? How many people are members of co-ops? What percentage of the population? Over time, is this percentage increasing or decreasing? Are the laws relating to co-ops favorable? Do co-ops receive tax breaks or other support from the government?
FOLLOW-UP
Further readings:
Alldred, Sarah. 2013. “Co-operatives Can Play a Key Role in Development.” The Guardian, July 6, 2013.
Cooperative Development Institute. “Co-op 101: A Guide to Starting a Cooperative.” The Northeast Center for Cooperative Business.
Kwakyewah, Cynthia. 2016. “Rethinking the Role of Cooperatives in African Development.” Inquiries Journal, Vol. 8 No. 6, 1-2.
Pérotin, Virginie. 2016. “What Do We Really Know About Worker Co-operatives?” Co-operatives UK, September 2, 2016.
Thompson, Derek. 2015. “A World Without Work.” The Atlantic, July/August 2015.
Further viewings:
Brodsky, Howard. 2017. “Cooperatives Build a Better World 2017.” May 24, 2017. 30 minutes.
“Defying the Crisis – The Spanish Collective Mondragón.” German Public Television, January 25, 2012. 5 minutes.
“Mondragon Corporation.” 2014. 15 minutes.
Okuk, Niki. 2016. “When Workers Own Companies, the Economy is More Resilient.” TEDxCrenshaw. October 2016, 12 minutes.
Veysey, Graham. 2010. “The Cleveland Model” Evergreen Cooperative Network. May 13, 2010. 6 minutes.
References:
Bloomberg. 2018. “Company Overview of Caja Laboral Popular Coop. de Crédito.”
Democracy Collaborative. 2018. “Evergreen Cooperative Laundry Expands to Second Plant, More than Tripling Its Workforce.” May 10, 2018.
Elejalde-Ruiz, Alexia. 2018. “Unemployment Rate for Chicago’s Black Youth Improves: Report.” Chicago Tribune, May 12, 2018.
International Cooperative Alliance. 2018. “Facts and Figures.”
Juvenal, Thais Linhares. 2006. “Empresas Recuperadas por Trabalhadores em Regime de Autogestão: Reflexões à Luz do Caso Brasileiro.” Revista do BNDES, Rio De Janeiro, V. 13, N. 26, December 2006. p. 115-138.
Mondragon Corporation 2009 Annual Report.
Perkins, A. “On the Transition from State Planning to a Cooperative System of Production in the Former Soviet Union.” Unpublished paper.
Re-Member, Inc. 2018. “Pine Ridge Indian Reservation”
Wang, Elaine and Nathaly Agosto Filión. 2011. “Case Study: Cleveland, OH: The Cleveland Evergreen Cooperatives” in Sustainable Economic Development: A Resource Guide for Local Leaders. Denver, CO: Institute for Sustainable Communities, pp. 30-36.
World Council of Credit Unions. 2003. “Statistical Data: United States Credit Union Statistics, 1939-2002.”
— 2016. “Statistical Report.”