Worker cooperatives may not solve unemployment, but they could go a long way to reducing it.
The recent recession was the worst since the Great Depression of 1929. It lasted from December 2007 to June 2009.
Today’s leading indicators show that the economy is improving, the stock market has recovered, house prices are rising and corporate profits are at record levels.
Unfortunately, unemployment has remained high long after the recession ended and is now hovering at 7.3%. What we have is a jobless recovery.
A look at the history of the last eighty years shows that our leaders have been unable to find lasting answers. After the Great Depression, the government tried to regulate the economy and stimulate demand to create jobs (Keynesian style). It worked for a while until the 1970s, when we had high inflation and high unemployment (stagflation).
Then we had a supply-side economy when taxes were cut on the rich and the economy was deregulated. With nothing to keep Wall Street in check, we ended up with the financial crisis of 2008.
Some on the left have suggested restoring the regulations, but that is unlikely to be effective as companies will find ways to circumvent or even remove them if they have a business-friendly Congress, as they have in the past.
Then there are those on the right who advocate deregulation, but that is what caused the current recession.
One way that a society can create jobs and socio-economic development is through the system of worker cooperatives, ie cooperatives that are cooperatively owned and democratically managed by their worker-owners.
HISTORY AND STRUCTURE OF WORKERS COOPERATIVES WORKERS
Cooperative efforts have occurred throughout history since the first humans cooperated with each other to hunt. The cooperative as a modern business structure originated in 19th century Britain when people came together in response to depressed economic conditions brought about by the Industrial Revolution.
The system soon spread throughout Europe and the rest of the world, for example in France in the 19th century during the Paris Commune and the kibbutz in Israel in the 20th century.
A cooperative is not a business in itself, but rather a business model that sells goods or services like any other business. The difference remains in the structure of the cooperative. It is democratic, ie all members are equal in decision-making and employ the decision-making process of one member, one vote. Each worker owns a share in the cooperative and the company is owned and controlled by the workers.
How can this make a difference to the unemployment rate?
Bob Ewing in the Journal of Humanitarian Affairs has a perspective on this, that is, people have different abilities, for example, some can do things, while others have math skills, and others can handle public relations. Separately, they cannot run a successful business, but working cooperatively, they can.
Some people cannot start their own business because they lack all the necessary skills and cannot afford to hire. When the circle expands, the base of potential resources broadens, and that leads to a stronger corporate foundation (see Worker Cooperatives Can Create Jobs by Bob Ewing, January 13, 2012, Journal of Humanitarian Affairs).
Cooperatives vary in different ways and it is useful to look at Mondragón in Spain, the Argentine model and cooperatives in the United States.
THE MONDRAGON MODEL
Probably the most famous cooperative is the Corporación Cooperativa de Mondragón in Spain. In 1941, a Catholic priest went to the ‘Basque Country’ to teach at a vocational school and his students started a small cooperative that has expanded into a vast network of various successful businesses.
Under this model, management is elected by the workers and managers are part of the cooperative process. Each company has a social committee that considers welfare issues; capital is borrowed and employees become worker-owners and the surplus is distributed between them and consumers (Mondragon: A Better Way to Go to Work? by Oklahoma City Catholic Worker).
Mondragón has its own bank (Caja Laboral Popular) which provides an available financing offer; it has its own insurance cooperative (Lagun – Aro) that provides social security, pensions and medical services. The companies trade with each other and together they form a self-sustaining economic community independent of the national economy (Mondragon-Humanity at Work).
Mondragon has generated 83,859 jobs in Spain in finance, industry, distribution and knowledge; he has 9,000 students and 85% of his industrial workers are members. It is the first Basque company and the 7th in Spain. (Mondragon-Humanity etc).
THE ARGENTINE MODEL
The cooperative system in Argentina was called the ‘recovered factories’ movement whereby workers took control of factories or other businesses where they had worked after the factories went bankrupt or after a factory occupation to avoid a lockout.
As a result of the severe economic crisis of 2002-2003, worker-run businesses began to multiply in a wide range of areas, from car manufacturers to rubber balloon factories. Workers form cooperatives and decisions are made in assemblies, while receiving advice and support from other labor companies and government institutions (cooperative economy).
According to Marcela Valente, Inter Press Service correspondent in Argentina, today there are 205 recovered companies with a total of 9,362 workers and as the economy grows these cooperatives continue to grow. Fifteen percent of the recovered companies export part of their production and another 60% have the potential. In recent years the government has given them a boost by distributing more than $1 million in subsidies.
Worker cooperatives have also been developing in other Latin American countries: there are 69 recovered companies in Brazil, 30 in Uruguay, 20 in Paraguay and a growing number in Venezuela (Great Growth of Worker Cooperatives in Argentina by Marcela Valente) .
WORKER COOPERATIVES IN AMERICA
There are 23 million unemployed people in the United States. Unions that were once able to raise wages have been weakened with a membership of just 11.9% of the workforce. At the same time, global competition has caused corporations to flee in search of global markets.
The flight of the manufacturing industry will not be reversed as production costs abroad are lower. This means that it is necessary to find new sources of employment.
The answer, according to University of Maryland professor Gar Alperovitz, lies in looking at local communities. In the last 3 decades, more than 13 million workers have become owners of their own companies, 6 million more than union members in the private sector. There are more than 4,500 nonprofit community development corporations that operate affordable housing, and 130 million Americans are members of credit unions and cooperatives.
“Social enterprises” that transform capital ownership into businesses have mushroomed in communities to provide community services.
Cooperatives make a difference, for example, in Cleveland, a group of worker-owned businesses, backed by the purchasing power of large hospitals and universities, have taken the lead in developing “green” projects capable of creating thousands of jobs of work (America Beyond Capitalism by Gar Alperovitz).
But much more needs to be done. In the private sector there are billions of dollars sitting idle in the banks (testimony to the failure of the trickle down economy); the lack of availability of capital is the biggest barrier to the formation of cooperatives and the main reason why they have not grown more. Interest rates are very low, so the government should borrow these funds and use them to provide vital start-up capital for new businesses, especially the unemployed and minorities, since these groups have a hard time getting loans.
The concept of worker cooperatives is still in its infancy in the United States, but they have real potential as a source of much-needed jobs.
THE CATALYST FOR WORKER COOPERATIVES WORKERS
The catalyst for worker cooperatives has mainly been harsh economic conditions, as in Britain after the Industrial Revolution and in Argentina at the turn of the century. It is interesting to note that in Argentina, as the economy grows, worker-run factories remain robust, suggesting some element of viability.
In the age of nuclear power, a world war is unlikely to rescue us as World War II and the Great Depression did.
Worker cooperatives are not the only answer to unemployment, but they can provide their members with a good way of life, a good standard of living, work and social security.
The United Nations declared 2012 THE YEAR OF COOPERATIVES to raise public awareness of the invaluable contribution of cooperatives to poverty reduction, job creation and social integration. The unemployed should seize the moment and embrace this alternative model of doing business. It is a much better option than waiting for the government or the private sector to act.
Victor A. Dixon
September 2, 2012
Reviewed on September 29, 2013
