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Aug 17 2015

Anti-Capitalist Meetup: The Cooperative Movement vs Capitalist Domination in the Global Economy

By Geminijen

I’ve been running around to various left conferences this spring and summer and everywhere I go the cooperative movement is touted as the potential savior of the global economy. Admittedly, cooperatives are only “a grain of sand on the beach” (to use a summer metaphor)when one views the entire global economy. At this point it is also not clear that the interest in a cooperative economy is not just a desperate hope that something  – anything – can save us from total economic catastrophe as capitalism seems to be in its last throes with levels of inequality that cannot be sustained.

Do cooperatives really have the potential to be a transition to another more fully progressive economic form that can replace capitalism? Or is it – as cooperatives generally have been – a temporary safety valve during depressions which disappear or are assimilated over time or a capitalist reform as capitalism regains its footing (i.e., the mines in England, the paper plants in the Northwest United States, the electric cooperatives in the Southwest United States).

Since the cooperative movement is currently the fastest growing movement for systemic economic change it deserves an overview of what it is and where its going –which I will attempt to do, in a very limited way.

I will briefly comment on the recent changes in the cooperative movement in:

1) Venezuela which has attempted to use coops as part of its transition to socialism;

2) In the Mondragon cooperative network which applies the cooperative principles in the capitalist system;

3) In the United States because it is in the belly of the beast of capitalism and as such has special problems, and

4) In Cuba which is using cooperatives to transition away from a fully socialist economy to a more mixed economy. (I will write a separate article on cooperatives in Asia or Africa as BRIC countries have unique problems, although India has a highly developed cooperative economy and China has the most cooperatives in the world.)

Venezuela. Solidarity, cooperation, and community empowerment are socialist values promoted by the Bolivarian Revolution in contrast to the individualism and selfishness promoted by the corporate-owned economy. Because cooperatives promote socialist values, it is natural that the Bolivarian government once promoted cooperatives in Venezuela; what is surprising is that now it does not.



Even before President Hugo Chávez took office in February 1999, there were 813 registered cooperatives in the country with 230,000 total members. Most of these original cooperatives are still active, tough, and resilient. The strongest of these is CECOSESOLA (Cooperatives of Social Services of Lara State) which includes the food co-op consisting of 538 worker members who sell to 60,000 shoppers each week. Though their prices average 30 percent less than those of commercial supermarkets, their annual sales top US$20 million. This incredibly sophisticated business operation has no bosses or managers; the workers rotate jobs; and all workers receive the same pay. The network also has many different types of small producer cooperatives, credit unions, a health clinic with both conventional medicine and alternative therapies, and a network of cooperative funeral homes.

Chavez’s Cooperative Law of 2001 was written by cooperative experts; it sets the minimum number of members at five and requires the government to give preference to cooperatives when awarding contracts. After the failed coup in April 2002, President Chávez began to emphasize cooperatives in a big way in order to transform property into collective forms of ownership and management. He set up a national job-training program, Mission Vuelvan Caras (“About Face”), that paid the minimum wage to the unemployed while they learned basic occupational skills; the trainers taught about cooperatives in every course, and they encouraged the graduates to form one. Co-op registration was made free of charge, co-ops were exempted from income tax, and micro-credit was made available to them.

For six years, from 2002 to 2008, the government invested heavily in their campaign to form cooperatives. The national cooperative supervision institute, SUNACOOP, which headed the government’s campaign, focused on basic education and the legal registration of new cooperatives. This resulted in the creation of over 280,000 registered cooperatives.

This resulted in the Strategic Solidarity Alliance, among others, a network of 17 cooperatives with a total of 986 members that service the Caterpillar heavy equipment throughout the country. among others,However, the vast majority of the coops created in this period never became active or collapsed. In 2006 SUNACOOP did a “census” to count how many co-ops were active – they were very disappointed to find that due to insufficient training, poor supervision, and lack of followup support, only around 50,000 cooperatives were actually functioning. I would add that another factor was that insuffient oversight and the remnants of a corrupt culture led many to egister as cooperatives to take advantage of the government subsidies when they had no intention of  opening or operating coops. Since cooperatives are independent privately owned businesses, this prompted many of the less scrupulous owners to just take the money and run.

The high rate of failure among registered cooperatives prompted President Chávez to shift the government’s approach from cooperatives to “socialist enterprises” and worker takeovers of factories. In this way, the government pays the salaries, but keeps the ownership, and can guarantee that the enterprise does not close.

The shift to fully socialized communal councils, collectively referred to as the communal state, and basically consists of fully socialized groupings of families involved in self-governing projects based on participatory principles. The councils are political-economic-cultural structures engaged in such areas a food, housing, communications, culture, banking and justice.

It is also too soon to tell how communal councils will fare. Although they were always the end goal for the Bolivarian Revolution,  since it was necessary to impose it quickly, given the changing economic conditions in Venezuela (and the impending death of Chavez), it was done rather abruptly from the top down, which is not in the tradition of the Bolivarian model of participatory democracy from the bottom up. However, when I talked to a Venezuelan economist informally at the Left Forum, his take was that, given the desperate state of the economy since the economic crash and the drop in oil prices, the only positive ongoing project that might save the people was the communal councils.

Still, even with the shift to communal councils, Venezuela still has the highest total of coops for any country after China. After the government completely stopped promoting co-ops in 2008, another 40,000 new ones have been registered.

Why are people forming new cooperatives now?

First, because more than 50 percent of the  economy is the informal sector. The reduction in oil prices in recent years has devastated the formal Venezuelan economy, which is dependent on oil revenues, drastically increasing unemployment and inflation. If people aren’t employed by a private company or the government or part of the communal state, they need to do something to survive.

A second reason that new cooperatives are being registered is many of the people have, through cultural informal neighborhood “trusts” or skills learned through the cooperative education that the Bolivarian government provided, understand the cooperative concept. Comparing all the estimates from different sources, the number of coops today is approximately 90,000, with over a million members. The Venezuelan solidarity economy of cooperatives is a strong force of community empowerment that is still part of the Bolivarian project transforming people’s values from being self-centered to actively working for the common good. It remains to be seen whether cooperatives or communal councils will be the new economic model in 10 years — or perhaps both or neither.

The mere size of the cooperative and communal movement and financial commitment to it from the government has resulted is a definite lessening of poverty and a stronger social orientation by the people.  This is clear from the fact that the Communal Council plan was defeated in 2008, but, through education and with the support of the people, was reaffirmed in 2009.

The biggest danger to the cooperative or communal council model in Venezuela or any socialist leaning state is the constant pressure from global capitalist forces to over-throw  the entire State apparatus, to which those of us who support socially oriented societies must be constantly vigilant.

Mondragon. The Mondragon Cooperative Corporation (MCC) is the success story par excellence of the cooperative movement and its potential. It has developed into a world-wide network of cooperatives that boasted, at its peak, before the 2008 depression,  $14 billion in total revenues, distributed among 110 cooperatives, 147 subsidiary companies, eight foundations and a benefit society with total assets of 35.8 billion euros. The MCC has employed over 80,000 people, 32,000 of which are coop members, and include in their products manufactured goods as diverse as washing machines and high end bicycles as well as financial products such as hedge funds and a network of retail stores that span Europe. Fagor alone, had over 5,600 employees in 5 factories in Spain and eight other non-cooperative factories in China, France, Poland and Morocco, and the ratio of the CEO’s salary is limited to 10 times that of the highest paid worker.

A cursory reading  of the above litany promoting Mondragon’s huge financial success when compared to the ideological model clearly indicates some serious contradictions between theory and practice.  Fagor far exceeded the recommended size for a cooperative; the majority of workers in the Mondragon Cooperative Corporation are no longer cooperative members with voting rights but hired employees. Even among the coop members the conditions have changed – it is no longer one vote per share but one vote per coop member no matter how many shares they own. And while the CEO can only make 10 times what the highest worker makes (which is exponentially lower than traditional capitalist CEOs who make 200-300 times what a worker makes), it is still a much greater degree of inequality than in the original cooperatives. Moreover much of their business has left their location of origin (Spain) for places with cheaper production costs such as China (although they might argue that they are just trying to spread the wealth and cooperative values).

The bankruptcy of their Flagship Company, Fagor, due to its aggressive risk-taking (including the involvement of hedge funds)in order to compete with the big boys in global financial capital was just the tip of the iceberg in the slow slide of Mondragon into full scale advanced capitalism.  

Having said that, they still, after 60 some years,  represent some of the best aspects of the cooperative movement. In the 2008 economic depression they managed to save most of their assets and coop members jobs by voluntarily taking cuts in pay (even if they couldn’t save the jobs of workers who are not cooperative members – now up to around 50% of workers)

They never claimed to be other than capitalist per se and in those 60 years they have done a lot of educating of workers in other countries by teaching them how to form cooperatives and more importantly cooperative values (even if they don’t practice them fully) They are currently working with US unions such as Steel Workers and CWA to set up joint Union-Coop enterprises that combine cooperative values including sustainable growth. Yes, they are slowly, very slowly, succumbing to capitalist hierarchical values and concepts of competitive development, but in the meantime are helping to spread a more cooperative culture worldwide. In terms of the larger project, this may not be sufficient but it is a necessary component.

The United States.  

Since the United States has not in the past been cooperative “friendly” and potential cooperatives cannot rely on the State to provide resources to establish the cooperatives, they must rely on starting on their own from the ground up. Based on the private sector, three forms of cooperative networks have taken root:

1) The US Federation of Cooperative Workers which organizes smaller independent worker owned and managed cooperatives into an informal network, primarily at the grassroots level with few coops with over 20 workers.Most of there coops are in the service industry.  Small IT companies are also an increasing and promising group.

2) The Evergreen Model where local nonprofits and large scale community businesses  (anchor institutions) create a Consortium which creates jobs for depressed communities. While it is nominally democratic, the nonprofits and anchor institutions have voting shares and determine what the jobs would be instead of the future workers.

The workers do not yet have decision making control over their coops. Based on principles of community wealth building and sustainability, the Evergreen Initiative  launched a ten 50-person worker cooperatives in a variety of sectors to be realized over the five years. Within the cooperative movement such a community wide effort is called a cooperative “incubator.”

Unlike the Venezuelan model, however, where funding and planning for such a network comes primarily from the State, the Evergreen model utilizes a network of private, for profit and nonprofit institutions, along with (but not primarily reliant on),  state funding sources to provide the capital for a network of cooperatives. This greatly influences the amount of worker control of cooperatives as the incubators determine the jobs need based on the needs of the existing businesses, not what the people want.  There has already grown up a class of professional coop developers who determine the direction of the coops and whose interests are served. One of the points of the Professional Standards for Cooperative Development Practitioners is to insure that the coops are market driven and that market needs must precede other aspects of development. Recently, several state governments announced their support of the cooperative project. New York alone gave over $1 million to this project — not one penny of it went to forming an actual functioning cooperative but went to coop developers and non-profits in the consortium..

In the original project in Cleveland, even allowing for the recession and not counting the multiplier factor, the progress has been slow. They have established 3 working businesses – a commercial laundry, a solar panel business and a hydrophonic urban garden that covers one city block. They have hired a total of approximately 50 workers in total who receive $10.50 an hour and have so far saved $5,000 in equity per worker but workers still do not manage and control their own cooperative.

3) The third effort seems is the union-coop model. There are several impressive union service coops that have grown with union support and greatly improved their workers living and work conditions (Most notably the 1800 member CWA homecare workers coop in the Bronx).There has been one factory takeover in Chicago (New Era Windows) in which, after a considerable several year struggle, 17 of the original 200+ workers are running the factory. The union is also piloting several more capital intensive projects such as a field to table food hub which includes a processing plant(a capital intensive project, one of their goals. But again, the union provides much of the start-up money and has voting rights in the cooperative in addition to the workers who work there.

While the Evergreen and Union  Initiatives have several key similarities to the Mondragon model on which it is based –originally developed in a locally homogeneous minority community, designed to create jobs in a depressed economic area, based on the development of a network of worker owned and managed cooperatives  — they differs from the Mondragon model in several key ways:

1)  Mondragon based its plan on the development of human capitol. It educated and trained  the workers first. It then established a credit union (Caja Laboral Popular) made up of workers and built upon member savings and social security. The workers determined the nature of the projects and slowly built, with some initial state funding, the capital to support their cooperatives.

In both Evergreen and Union coops the leading force is the consortium of Anchor institutions and nonprofits or unions who designed the program. Thus the type of cooperatives, who is hired and the working conditions will be initially determined by the needs of the funding organizations.

2) While Mondragon cooperatives are organized in primary and secondary cooperative groups, establishing horizontal networks with the workers as the primary focus. Evergreen and union cooperatives are networked with unions, anchor institutions, non-profits, and city agencies, establishing a vertically integrated network with the External  institutions at the top.

3) Mondragon was started in the Basque country of Spain The Basque’s had a nationalist orientation with their own language and a tradition of political radicalism and were  homogeneous in terms of ethnicity & culture. While the Evergreen and Union Cooperatives are based primarily in an African American low-income community, which provides some ethnic homogeneity, it is significantly more racially, culturally, and economically diverse and situated in an economic tradition of capitalism and big industry, although the union tradition alleviates that somewhat, depending on the union..

In the end it is clear that, while the cooperative movement may result in some new jobs and creative opportunities for a small segment of our population, the people in the United States are fighting an uphill battle in overcoming the capitalist culture ingrained in both our government institutions and everyday culture. The more we connect to the international cooperative movement, the better chance we have of infusing our society with cooperative values.

Cuba

Earlier this year, Cuba announced that a large number of non-agricultural state enterprises will transition into private worker owned and controlled cooperatives. It is estimated that more than 10,000 coops will be established in the period 2015- 2017, by converting state enterprises into, what for Cuba, is a new type of business ownership structure. All currently existing state restaurants will become democratically managed cooperatives in a new system seeking to “restore equilibrium between state and private sectors.” If fully carried out, this will underscore the state’s commitment to reformulate Cuba’s economy as outlined by the 2011 reform guidelines.

While many in Cuba see this the death knell of Cuban socialism, others are rejoicing at the end of Cuba’s centralized bureaucracy and alienation of workers.  And not all are red-baiters. To be sure, the aggressive attacks of the United States on the Cuban economy (including the embargo) and the crash of the global economy in 2008 have forced Cuba into choices it may not have had to make otherwise.

For example, large centralized enterprises,  whether under public or private control do alienate workers.  But couldn’t smaller public enterprises solve this problem as well as private ones?  This is the same conundrum that Venezuela faces and we have seen the inverse problem — corruption in the private sector–solved in the opposite manner.  . I have attend at least two conferences where members of the cooperative movements from England, Canada and the United States were clearly hostile to anything Cuban  – in spite of its excellent track record in health and education, and agricultural cooperative development – and were anxious to become the next Bill Gates. They did not acknowledge similar hierarchical problems with the Mondragon and US cooperative models.

Cuba does intended to try to prevent the coops from becoming capitalism’s Trojan Horse. In many instances, conversion of state enterprises is centered primarily on the management function while ownership of equipment and plant will remain in the hands of the state. These assets will be leased to the new cooperative owners, presumably at reasonable terms, until they can be purchased by the cooperative in the future. As provided in State Decree 305 published in December 2013, NACs will operate under rules compatible with those of international cooperativism. These include voluntary and democratic participation, equality of ownership, and community responsibility.

In the economic arena, the state will grant NACs preferential treatment with regard to taxation and in terms of accessing supplies as compared to individual business owners. In the realm of democratic management, many questions exist concerning capacity to accomplish this goal, given Cuba’s history of centralization. Among the NACs, the ” grassroots coops” are a different breed of endeavor in that they arise from the entrepreneurial energies of a group wishing to create a new enterprise.

To date, although the time frame is too short and the sample too small to evaluate properly, many NACs are showing promising results. In numerous cases, in both types of NACs, wages have gone up and working conditions and morale appear to have improved. Democratic, though not always secret, elections of management take place.

Currently not many Cubans can accurately describe what a cooperative is, and how it functions, because this new type of enterprise has not yet directly impacted most citizens. One exception is the Taxi Rutero, a cooperative bus service that operates well-kept, bright yellow vehicles that travel the key traffic corridors of Havana. They compete with large, often dilapidated 1950’s gas-guzzlers, and appear to be more than holding their own. The cooperative does so by providing passengers with a more comfortable service at a lower price. In this case, the system of worker owners leasing equipment from the government seems to work well, perhaps a winning recipe for a new breed of public-private partnerships. (My only question is where did they get the taxis since new cars and car parts were not allowed into Cuba for so long due to the boycott.)

If plans become actions, by this time next year, the nuts and bolts of how cooperatives work may well have become household knowledge throughout Cuba. Since the great recession that started in 2008, the cooperative model has attracted attention worldwide attention out of necessity, thereby producing an accidental, but potentially important convergence between democratic empowerment of the people and socialist economics.

Things come in their own time and maybe we have to think of transitions in terms of several decades and multiple approaches toward creating a cooperative world – from consensus, to green sustainable options, to cooperatives, to communal councils and any other popular people’s initiatives that turn up.  The question is will the “transition” be in the direction we want.  

Although there are cooperative movements in almost all countries around the globe, they vary greatly in level of development and type of cooperative, from small micro-economic subsistence enterprises to large multinational operations such as the Mondragon multinational which originated in Spain.   Some countries have attempted to use cooperatives as part of a transition to socialism and are organized under socialist leaning states. Others see cooperatives as a way to create jobs by creating somewhat more democratic business enterprises under capitalism. It is clear from the data  overall, that all types of cooperatives have grown rapidly in the last eight years. Unfortunately, much of the data does not distinguish between types of cooperatives or specific models to determine whether they provide a sufficiently different model to challenge capitalism.

Background: The Rochdale Society in England, established in 1844, is credited with forming the guiding principles of the modern cooperative movement based on the seven Rochdale Principles:

1st Principle: Voluntary and Open Membership

Co-operatives are voluntary organizations, open to all persons able to use their services and willing to accept responsibilities of membership, without gender, social, racial, political or religious discrimination.

2nd Principle: Democratic Member Control

Co-operatives 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. In primary co-operatives members have equal voting rights (one member, one vote), and co operatives at other levels are also organized in a democratic manner.

3rd Principle: Member Economic Participation

Members contribute equitably to, and democratically control, the capital of their co-operative. At least part of that capital is usually the common property of the co-operative. Members usually receive limited compensation, if any, on capital subscribed as a condition of membership. Members allocate surpluses for any of the following purposes: developing their co-operative, possibly by setting up reserves, part of which at least would be indivisible; benefiting members in proportion to their transactions with the co-operative; and supporting other activities approved by the membership.

4th Principle: Autonomy and Independence

Co-operatives are autonomous, self-help organisations controlled by their members. If they enter into agreements with other organisations, including governments, or raise capital from external sources, they do so on terms that ensure democratic control by their members and maintain their co-operative autonomy.

5th Principle: Education, Training and Information

Co-operatives provide education and training for their members, elected representatives, managers and employees so they can contribute effectively to the development of their co-operatives. They inform the general public – particularly young people and opinion leaders – about the nature and benefits of co-operation.

6th Principle: Co-operation Among Co-operatives

Co-operatives serve their members most effectively and strengthen the Co-operative Movement by working together through local, national, regional and international structures.

7th Principle: Concern for Community

Co-operatives work for the sustainable development of their communities through policies approved by their members.

There are actually three types of cooperatives:

1) consumer coops where a group of people buy goods together such as a food and housing coops (the most common),

2) producer coops where producers buy and share production materials and tools such as tractors and seeds(very common world wide, particularly in agriculture),

3) worker owned and managed coops where workers actually produce products and services collectively and equitably. It is still assumed that worker owned and managed cooperatives are a part of the larger capitalist economy and private sector for the purposes of competition in the market even if they are run in a democratic and egalitarian manner inside the individual coop. (This is the least common and the most difficult type of coop to sustain in a capitalist world economy).

Since the Rochdale Principles are  based on the concept of consumer coops, they do not explicitly deal with the relationship of the workers to the ownership of the means of production.

I would argue that the Rochdale Principles are necessary, but not sufficient. If one wants to truly change or radically alter the current capitalist system, one must end the ownership of the means of production as individual private capitalist property as this is the mechanism for capitalist exploitation of workers which provides the capital for economic development and competitive growth. The workers only have control over their labor, even if it is only in their own cooperative within a larger capitalist system, in the third type of cooperative which are worker owned and controlled. It is this type of cooperative that can possibly provide the seeds for radical transformation.

When society only considers the distribution and exchange of goods (the consumer sector) when fighting for equality and social justice for people, we can see how easily hard fought for gains can be abolished should the capitalist owners of the means of production choose to pull their support and tank the economy. This is clearly evident in austerity programs of the social welfare states in Europe (notably Greece at the moment), Latin America  and even the more limited social welfare aspects of the United States.

It is also important to note that the development of a cooperative economy cannot be evaluated on the basis of the number of individual cooperatives alone, but is dependent on the degree to which they form an interdependent network and effect and are effected by the surrounding cultural and government support systems.