Workers’ cooperatives may not solve unemployment but they can be very helpful in 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, housing prices are up and corporate profits are at record highs.
Unfortunately unemployment has remained high long after the recession ended and is now hovering around 7.3%. What we have is an unemployment recovery.
A look at history over the last eighty years shows that our leaders have not been able to find lasting answers. After the Great Depression, the government tried to regulate the economy and stimulate demand to create jobs (the Keynesian way). It worked for a while until the 1970s when we had high inflation and high unemployment (stagflation).
We then have a supply-side economy because taxes on the rich are cut and the economy is deregulated. With nothing to control Wall Street, we ended up with the financial crisis in 2008.
Some on the Left have suggested reinstating the regulations but that is nearly impossible to be effective as companies will find ways to circumvent them or even abolish them if they have a company-friendly Congress as has happened in the past.
Then there are those on the Right who advocate deregulation but that is what is causing the current recession.
One of the ways in which the community can create employment and socio-economic development is through the workers’ cooperative system, for example cooperatives which are jointly owned and democratically managed by the owners of the workers.
HISTORY AND STRUCTURE OF WORKER COOPERATIVES
Cooperative efforts have occurred throughout history since early humans worked together to hunt. Cooperatives as a modern business structure originated in 19th century England when people united in response to the depressed economic conditions of the Industrial Revolution.
This 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 separate business but a business model that sells goods or services just like any other business. The difference lies in the cooperative structure. It is democratic, for example all members are equal decision makers and use a one member, one vote decision-making process. Each worker has a share in the cooperative and the company is owned and controlled by the workers.
How can this make a difference in the unemployment rate?
Bob Ewing in the Journal of Humanitarian Affairs has a perspective on this: people have different skills, for example some can make things, while others have math skills, others can handle public relations. Separately they cannot run a successful business but working cooperatively they can.
Some people can’t start their own business because they don’t have all the required skills and can’t afford to hire. As the circle expands, the potential resource base widens and it leads to stronger corporate foundations (see Worker Cooperatives Can Create Jobs by Bob Ewing, January 13, 2012, Journal of Humanitarian Affairs).
Cooperatives vary in different ways and it is helpful to look at the Mondragon in Spain, the Argentine model and the cooperative in America.
MONDRAGON MODEL
Perhaps the most famous cooperative is the Mondragon Cooperative Corporation in Spain. In 1941 a Catholic priest went to the ‘Basque Country’ to teach in a vocational school and his students started a small cooperative which has grown into a wide network of successful businesses.
Under this model, management is chosen by workers and managers are part of a 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 Workers).
Mondragon has its own bank (Caja Laboral Popular) which provides ready-to-use financing supplies; has its own insurance cooperative (Lagun – Aro) which provides social security, pensions and health services. Companies trade with each other and together they form an independent 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; has 9000 students and 85% of its industrial workers are members. It is the leading Basque business and the 7th largest in Spain. (Mondragon- Humanity etc).
Argentinian MODEL
The cooperative system in Argentina is called the ‘restored factory’ movement in which workers take over factories or other businesses they work for after the factories go bankrupt or after factory occupations to escape lockdowns.
As a result of the severe 2002-2003 economic crisis, worker-managed companies began to proliferate in areas ranging from car manufacturers to rubber balloon factories. Workers’ cooperatives are formed and decisions are reached in the assembly, while they receive advice and support from other worker-owned enterprises and government agencies (cooperative economy).
According to Marcela Valente, Inter Press Service correspondent in Argentina, there are currently 205 recovering companies with a total of 9362 workers and as the economy grows, the cooperative is still growing. Fifteen percent of the recovering firms export some of their output and another 60% have potential. In recent years, the government has given them a boost by distributing more than $1 million in subsidies.
Workers’ cooperatives have also grown in other Latin American countries – there are 69 recovering companies in Brazil, 30 in Uruguay, 20 in Paraguay and a growing number in Venezuela (The Great Growth of Workers’ Cooperatives in Argentina by Marcela Valente).
WORKERS COOPERATIVE IN AMERICA
There are 23 million unemployed people in America. Unions that used to be able to raise wages have weakened with membership of just 11.9% of the workforce. At the same time, global competition causes corporations to run for global markets.
The runaway manufacturing industry will not reverse as production costs abroad are lower. This means that it is necessary to find new sources of work.
The answer, according to Professor Gar Alperovitz of the University of Maryland, lies in looking at local communities. Over the past 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 4500 nonprofit community development companies operating affordable housing and 130 million Americans are members of cooperatives and credit unions.
“Social enterprises” that convert capital ownership into businesses have mushroomed in the community to provide services to the community.
Cooperatives do make a difference so for example in Cleveland a group of worker-owned companies, backed by the purchasing power of major hospitals and universities have taken the lead in developing “green” projects capable of creating thousands of jobs (America Beyond Capitalism by Gar Alperovitz).
But much more remains to be done. In the private sector there are billions of dollars lying idle in the bank (testimonies of economic failure trickle down); the unavailability of capital is the biggest obstacle to the formation of cooperatives and the main reason why they are not developing more. Interest rates are so low that the government has to borrow these funds and use them to provide important start-up capital for new companies especially for the unemployed and minorities as these groups have difficulty getting loans.
The concept of worker cooperatives is still in its infancy in America but they have real potential as a source of much-needed employment.
WORKER COOPERATIVE CATALYST
The catalyst for workers’ cooperatives was particularly harsh economic conditions as in England 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, factories run by workers still remain strong showing some elements of viability.
In the age of nuclear power, world wars are unlikely to save us as they did in World War II and the Great Depression.
Workers’ cooperatives are not the only answer to unemployment but they can provide a good way of life for their members, a good standard of living, jobs 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 must take advantage of this moment and adopt this alternative model of doing business. This is a much better option than waiting for the government or the private sector to act.
Victor A. Dixon
September 2, 2012
Revised September 29, 2013