Co-ops and Economics

Food for (Economic) Thought

Equal Exchange bananas on display challenging the mighty Chiquita brand

Equal Exchange bananas on display challenging the mighty Chiquita brand

My September brightened like tropical sunshine when I found Equal Exchange bananas at Stop & Shop in Norwood, Massachusetts. There they were, occupying display space beside the ever present Chiquitas. The Massachusetts-based co-op, Equal Exchange, continues to advance fair trade food production internationally. It’s great to see evidence of it at a major grocer.

Fair trade products and a broader food movement taking place are not only improving how we eat, they’re increasing political and economic freedom. This month, a thought-provoking article on CounterPunch by Jonathan Latham recounts a worldwide food movement in an article titled, Food Liberation: Why The Food Movement Is Unstoppable. The article describes food as a basis for economic thought. As the co-op movement brings to light, there are alternative ways to consider business interaction besides competition. The food movement brings with it a “philosophical shift” challenging food as a commodity and business. Food as an industry, descendant from western enlightenment thinkers, has become disconnected from natural interconnection.

“Enlightenment thinkers laid the groundwork for a meritocratic and commercial society to replace feudalism and their ideas justified the necessary concepts that the founders of the new society came to rely on: mechanization, individualism and competition. Nowadays, their ideas are used for preserving this order, even as the intellectual flaws of that understanding are increasingly manifesting as ecological crises, not least in the form of global climate change — a crisis that the food movement could play a critical role in addressing.”

The food movement has lessons for us all:

“Food philosophy thus replaces the neo-Darwinist narrative of life-as-competition with the idea that life thrives in the presence of other life. There is perfectly good evidence for this — we know, for example, that the tens of millions of species on Earth are interdependent.”

In Brazil a food movement is benefiting millions of children and small farmers with a top-down approach. Thomson Reuters Foundation reports on the world’s largest universal feeding project. A law dictates that 30% of school meal budgets must go to small farmers. Farmers and co-ops are benefiting: the predictable income allows them to obtain deeded land rights and reinvest in the land.

Equal Exchange buys from co-op farmers around the world. They buy cashews from Tomy Mathew from the southern India state of Kerala. At an August event, he explained how fair trade has created a market in that region allowing a higher standard of living, including good wages. Equal Exchange is now looking to connect farmers and citizen-consumers with an initiative called the Action Forum. As Equal Exchange says: small farmers, big change.

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Uber-contradiction

Sharing might not be sharing. A major rebuke of the sharing economy kicked off last November with Platform Cooperativism in New York. The event brought together thinkers and builders of a more cooperative internet and was described as taking back the internet by Co-operative News. Since then, a defining factor of whether you see the sharing economy as part of the problem or part of the solution, is whether you see Uber as part of the problem or part of the solution.

Uber embodies inequality according to Platform Cooperativism. Nathan Schneider, a co-organizer of the New York event, is quoted by Co-operative news: “Uber and Airbnb have brought our challenge into stark relief. On the one hand, they’re incredibly convenient and appealing tools that are in some ways tremendous advances on how things were before. However, they have made quite clear that they are not willing to be accountable to the communities in which they operate – to city governments, for one, and to the labour protections that workers have fought for for centuries.”

Others point to Uber as a successful example of the sharing economy. If you check #sharingeconomy on Twitter, you’ll see admiration for Uber with a tweet about Hertz joining forces with Uber. But in the same thread is a Shareable article from last November, comparing Uber to the Death Star.

And the Uber debate has now been taken up at the Stern School at New York University. Professor Arun Sundararajan has written a book questioning status quo sharing economy services. Called The Sharing Economy, Forbes magazine reports the new book has a chapter hypothesizing Uber becoming a co-op. I look forward to reviewing the book in a future blog post.

Beyond New York, Amsterdam is proactively addressing the sharing economy and recently put out an “action plan” for the city. But their plan is challenged by defining the sharing economy and considering equality. An article in Shareable wonders who the sharing economy benefits in the city’s planned initiative. The plan includes Uber as a sharing option: “improving the use of taxi cab capacity via the Uber app.”

Leaders of the November Platform Cooperative conference, Trebor Scholz and Nathan Schneider, continue advancing the conversation. Trebor was recently interviewed for a Shareable article (yes they really cover this stuff) about cities and Platform Cooperativism. Also see Nathan Schneider’s site internetofownership.net for a directory of online cooperative platforms and his great blog with news on technical co-ops.

 

 

 

Connecting co-ops in North America

As a network of co-ops builds in the US, redefining economics is resulting as well—a topic I’ve mentioned in several previous blog entries. There’s a mandate to develop an economy that includes solidarity. Other terms on the topic are: a sharing economy (which is defined differently depending on who you ask), or a generative economy. Efforts around the country are piecing together inchoate ideas for now, but show great thinking and promise.

In April, RIPESS North America (Intercontinental Network for the Promotion of the Social Solidarity Economy-N. America) initiated a forum in Detroit to discuss solidarity in economics. The efforts to develop this forum exemplifies the solidarity of organizations to address progressive economics. RIPESS North America joined with the U.S. Solidarity Economy Network (SEN), the Canadian Community Economic Development Network (CCEDNET) and the Chantier de l’économie Sociale in Quebec to create the forum. RIPESS-NA formed a Coordinating Committee that also includes the Democracy Collaborative, the New Economy Coalition, the Rosa Luxemburg Stiftung and Detroit organizations, including: the James and Grace Lee Boggs Center to Nurture Community Leadership, the Center for Community Based Enterprise (C2BE), the East Michigan Environmental Action Council (EMEAC), and the Conscious Community Cooperative. It’s a mouthful, I know!

Beyond the forum, one visual approach is to map the solidarity economy. At their site US Solidarity, an interactive map shows “individual solidarity economy practices and the solidarity economy as a whole. This has benefits for participants, publics, and policymakers alike. Particular emphasis is placed on the cooperative and community-centered nature of the economic activity.”

In Massachusetts, The Greater Boston Chamber of Cooperatives has formed with the mission “dedicated to strengthening and expanding the greater Boston cooperative economy through education, advocacy, and collaboration among its member organizations. Through shared resources and cross-sector collective action, we are working to build a more just, democratic, and sustainable economy.”

With so many groups involved, these perspectives on economics can appear overwhelming. But the work of small efforts can combine and form larger impact together—in solidarity. The results won’t necessarily translate to an overarching economic policy that we’re used to. These many groups working together demonstrate that small can be a solution because they bring diverse thought, different answers for different people. I like to quote the great E. F. Schumacher and say that in regards to economics, “small is beautiful.” But uniting is the current challenge for solidarity economics and cooperatives.

 

Defining the Sharing Economy

Defining the sharing economy continues. An inspiring event took place at the Goethe Institut in New York, January 21st. In previous entries I wrote about Platform Cooperativism, that took place in November. This was a follow-up event with a gifted panel of experts questioning the current “sharing economy” and what it could be.

Artwork for Platform Cooperativism a movement developed by Trebor Scholz with events at The New School and Goethe-Institut, New York

Artwork for Platform Cooperativism a concept penned by Trebor Scholz including events at The New School and the Goethe-Institut, New York

Panelist Trebor Scholz who coined the term Platform Cooperativism has again convened thinkers and solutions that spread wealth and  ownership to workers. Following the November event Trebor wrote an educational and inspiring report, Platform Cooperativism, published by the Rosa Luxemburg Foundation. It describes the reality of the “on-demand economy” we have today, often described as a sharing economy, where “companies like Amazon, CrowdSpring, and Taskrabbit” are creating more damage to society and workers than their supposed innovation. The result is “Platform capitalism” coined by Sasha Lobo and Martin Kenney. Scholz writes: “platform capitalism, so far, has been highly ineffective in addressing the needs of the commonwealth. What initially looked like innovation, eventually cranked up the volume on income inequality.” Uber and CrowdFlower are other examples.

The solution is building equality into alternate platforms that serve similar functions. Trebor wants to make clear that it’s being done. Blockchain technology was discussed at length in the November conference as one approach. Trebor writes: “Convincing tools based on blockchain technology have emerged over the past few years. Loomio, Backfeed, D-CENT, and Consensys.”

Other panelists at the Goethe-Instiut were Brendan Martin, Felix Weth, Chelsea Rustrum, and Emma Yorra.

Brendan Martin, founder of Working World gave some great perspective on what we’re confronting with ownership in today’s sharing conversation. Class warfare has repeated itself, and we are facing an age-old problem, he said. This puts discussions of ownership into perspective. Common grain storage in ancient times, for example, may have been stored for the common good, however, eventually ownership consolidates to fewer and fewer owners. Then the disadvantaged seek ownership again from the wealthy few, and the process repeats itself. This cyclical pattern reminds me of Saul Alinsky’s observation in his book Rules for Radicals where those that lack power may eventually get it, then conversely fight to keep it. This yin yang pattern in both ownership and power should be kept in mind.

Panelist Felix Weth is the founder of Fairmondo, mentioned in my last post. The German-based co-op  is spreading into the UK. Hopefully there will be expansion into the US.

Chelsea Rustrum had a great message that sharing can actually be an advantage. She is a co-author of It’s a Sharable Life. In an earlier blog post I show that co-ops can outperform traditional capitalistic business models. Sharing of wealth at co-ops could exemplify this kind of advantage. At the Platform Cooperativism conference the term stigmergy was presented as a model studied by Joel Deitz and others. If groups have superior ways of coordinating then competitive advantage could result.

Panelist Emma Yorra has an impressive resume working with co-ops in New York and Working World in Nicuaruagua. She also mentioned collaboration with the oft mentioned financial co-op in platform cooperativism: Robin hood.

Sharing is a topic I believe all businesses should take seriously for practical reasons. I write this blog because co-ops share ownership, wealth, responsibility, and advantage. Cooperative platforms are no different.

Cooperative Economics

I think about economics a lot lately thanks to the Platform Cooperativism conference at the New School in New York. This is my second blog post about the cooperative topics discussed that ultimately address for me the all-important topic of wealth distribution. Prosperity can spread by borrowing the best qualities of today’s businesses and then structuring them democratically. Some innovative cooperative platforms already exist; capitalism can be modified as we can potentially teach corporations new and valuable forms of transaction; and government can help, too.

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American Worker-Owned Co-ops = Good Business

The Democracy at Work Institute, a sister organization of US Federation of Worker Cooperatives (USFWC), released a report this year called US Worker Cooperatives: State of the Sector that gives an overview of US worker-owned co-ops. The report observes that much has been said about worker co-ops internationally, but that US worker co-ops as a whole have lacked analysis. The report tallies 256 worker co-ops in the US. A small number, likely an underestimate due to lack of data, but the report concludes US worker co-ops — known for delivering social, democratic, and community benefits — deliver impressive profits and growth.

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Tiddler’s Success

What’s a tiddler? I had to look it up. It’s a very small fish or, in the case of an article I recently read in The Economist, it’s the “little guy”. The little guy is thriving in, of all places, a segment of the investment banking industry. The Economist reported in the December 6-12 issue that small investment banks are now taking away merger and acquisition (M&A) business from large financial institutions. (more…)

Janelle Orsi and the Sharing Economy

If you’re trying to determine what the new economy means, author and attorney Janelle Orsi can do a lot to help. In her book Practicing Law in the Sharing Economy, Orsi gives compelling insight into the practical application of law to solve, or attempt to solve, the challenges of a new way to function economically. I’m inspired by this approach that Orsi puts on the shoulders of transactional law. Human interaction is the point at which Orsi sets her sights. (more…)

Co-ops Explained in Sixty Seconds

A co-op can be difficult to explain. But KingBird Content has ventured to do it in sixty seconds. See the video below for the most essential aspects of co-operatives. Information collected in this video comes from the ICA definition of a co-op, and the ideas of Janelle Orsi, Marjorie Kelly, and Stacey Cordeiro. (more…)

Elinor Ostrom for Worker Co-operatives

In my previous CommonBound conference blog entry I described the workshop I attended with Marjorie Kelly and Janelle Orsi. I wanted to also write about their idea of applying Elinor Ostrom‘s “design principles” of stable local common pool resource management (CPR) to the governance of co-ops. Ostrom won a Nobel prize in 2009 for economics. Kelly and Orsi gave a handout on her principles, and how these principles can apply to co-ops. I’ve taken directly from the handout below. CPR is about common resources, therefore, the concepts don’t translate directly to worker co-ops, but still offer interesting possibilities for governance design. Workers as stakeholders correlate in this instance as “resource appropriators” in an enterprise. In bold font is the principle from Ostrom, also found on Ostrom’s Wikipedia page. Following each principle is a suggested application to co-ops from Kelly and Orsi.

1. Clearly defined boundaries (effective exclusion of external un-entitled parties). How can a worker co-op clearly define who is a member and how to become a member? What should be the barriers to entry? How can members resign or be expelled?

2. Rule regarding the appropriation and provision of common resources that are adapted to local conditions. Adopt rules about how much people are entitled to work and about ideal working conditions? Adopt rules that prevent some workers from capitalizing off the labor of others? How will this vary based on local conditions, i.e., the type of business?

3. Collective-choice arrangements that allow most resource appropriators to participate in the decision-making process. How can worker co-ops enable all workers to participate in the decision-making process? Collective governance? Distributed governance structures? Holacracy?

4. Effective monitoring by monitors who are part of or accountable to the appropriators. Designate someone who makes sure that the rules are being followed, that the co-op is in good health, and that the values of the co-op are being upheld?

5. A scale of graduated sanctions for resource appropriators who violate community rules. What could sanctions look like in the context of a worker co-op? Cutting hours? Reducing decision-making power temporarily? Put someone on toilet-cleaning duty?

6. Mechanisms of conflict resolution that are cheap and of easy access. How can a worker co-op make conflict resolution cheap and easy? Internal conflict resolution training? Internal conflict resolution team? Agreements with other cooperatives to mediate one another’s conflicts? Agreements with local community mediation centers?

7. Self-determination of the community recognized by higher-level authorities. Self-determination partially means that outside investors can’t control the co-op. Self-determination is limited by government-imposed regulations dictating the ways that co-ops can structure relationships between employer/employee, investor/business, etc.

8. In the case of large common-pool resources, organization in the form of multiple layers of nested enterprises, with small local CPRs at the base level. Create semi-autonomous circles of management within a larger co-operative? Nest co-operatives within larger networks of co-operatives? Co-ops of co-ops?

A Conference for a New Economy (and Co-ops)

June 6th through 8th I attended CommonBound, a conference to consider directions for a new economy, organized by the New Economy Coalition (NEC). A significant part of the future outlook is co-operatives.

One workshop I was lucky enough to attend was run by Marjorie Kelly and Janelle Orsi on social enterprises. Marjorie Kelly has been a pioneering writer on ownership; I noticed that her concepts of generative and extractive economies, were used widely elsewhere at this conference and appear to be integrated into the narrative for economic change. Janelle Orsi is an attorney and writer, well-known for her work based on sustainability, equity, and sharing. Their workshop demonstrated that local interests can suffer without local investment: if Wall Street controls a company, is there any incentive to invest in local communities? It’s a question that came up again elsewhere at the conference. How can co-ops afford to support business ideas like serving less profitable clientele and communities? The answer: democratic ownership and decision-making. Such an ownership structure allows for investment of surplus income that may not be strictly for profit. Equal Exchange was mentioned as a leader in this area with the ability to focus resources on ethical food production that might be a financial risk, e.g., supporting banana farmers.

Governance makes it happen. Governance is the management structure of an organization, also known as bylaws. The importance of governance was a guiding message from the Kelly/Orsi workshop. The composition of governance is critical and should be set up with careful consideration. But it can, and will most likely, be difficult work. A later workshop described the work involved in converting to a co-op that took 18 months for the landscape company, A Yard and a Half Landscaping, located in Waltham Massachusetts. That same workshop featured Cero a new Boston-based co-op that will collect restaurant waste and has wrangled with start up challenges for over a year.

Co-ops come in all shapes and sizes, but it is the governance that defines their organizational principles. Stacey Cordeiro of the Boston Center for Community Ownership outlined this in a workshop on co-ops. As Janelle Orsi described, a co-op can start to be defined by a tax status provided by the U.S. government called “Subchapter T.” It will provide a co-op with a tax structure supplied by the IRS, and start to provide bylaws for its management. Cordeiro outlined three components of Subchapter T as: 1. Subordination of capital. 2. One member, one vote, and 3. Operating at cost.

Co-ops are part of a movement to include all walks of life. Melissa Hoover and Joe Rinehart from the US Federation of Worker Cooperatives presented and discussed diversity in co-op development, and the importance of a venue for multi-language interaction. Co-ops can be all-inclusive and need to consider new approaches to inclusion. The CommonBound conference made an effort and was successful in bringing a diverse group of people together. NEC generously and wisely offered scholarships which helped me to attend the conference.

Co-ops are helping to change the world, but like any other part of change, they are hard work. Designing the governance of a co-op is a good example. Co-ops compel people to work together democratically to form and then run a co-op — the development of a democracy is work, and then the democracy it creates is work. A contradiction perhaps, but I don’t think anyone wants a work-free future. We’re looking for an inclusive future where we’re all doing work we love.

Co-operatives and Capitalism

A friend commented that this blog is anti-capitalist. I can understand this perception, but want to prove that co-ops are not anti-capitalist. It should be noted that co-ops are, generally speaking, profit generating enterprises. What is unique about them is sharing wealth. As Stacey Cordeiro from the Boston Center for Community Ownership phrases it, co-ops subordinate capital.

Here is capitalism defined by Wikipedia: an economic system in which trade, industry and the means of production are controlled by private owners with the goal of making profits in a market economy.

Thought has been given to co-ops functioning within capitalism. Going back to 2011, author and economist Noreena Hertz wrote a report called Co-op Capitalism. Written as a response to what she terms as “Gucci Capitalism” marked by an unregulated period of greed, the report outlines co-ops as a solution. She describes four benefits of co-ops: community preservation; quality and power of relationships affecting performance; the economic and social connection; and the value of sharing resources with collaboration.

It might seem counter-productive to start an enterprise that distributes wealth. Co-ops can also be challenging to manage with broad input on decision-making. But the benefits Hertz describes can create practical sustainability. In response to skeptics, Hertz presents co-ops as thriving businesses and points out major co-op enterprises in Switzerland, Italy, the UK, and Africa. And given the health of worldwide co-operatives today, their impact has only increased since this report was written. See the ICA’s reporting on co-ops worldwide: The World Co-operative Monitor Project.

Maybe it’s the definition of capitalism that is to be redefined by co-ops. I still like the concept of a generative economy coined by Marjorie Kelly. Maybe generative capitalism sums up what is transformative about co-ops.

 

New Economics and Distribution of Wealth

Richard Wolff, the author of Capitalism at Work: A Cure for Capitalismis a popular economist right now. He recently presented in a video, linked here, posted on the Democracy at Work website where he emphasizes that people are looking for an alternative to capitalism. Then he presents a solution: democratically run work places. 

The video is 2 hours and 19 minutes long. At the 1 hour, 35 minute mark, he discusses co-ops and shared profits. One interesting approach he mentions is giving consumers an option to buy co-op produced consumer goods with explicit labeling.

Political backing is an important asset for a successful co-operative movement, and Wolff points to Italy where the government will give unemployed people the option of opening a co-op with a cash incentive. Instead of unemployment payments, a lump sum is given to those that are willing to gather a group of people and start a co-op.

The distribution of capital is an approach endorsed by Wolff. But, as I mentioned in my last post, this is the thinking of other economic thinkers, too.

Wolff sounds like Gar Alperovitz (Books: What Then Must We Do? and America Beyond Capitalism) who stresses the impending necessity for systemic change to capitalism. Dating back to September 2012, the video linked here, is one of many where Alperovitz points out the requirements for an alternative. He says: “It begins with the question: who owns the capital?” Worker ownership and the experiments are important. He starts talking about this at about 17:42.

But what is important to remember, as Alperovitz points out in a recent Real News interview in January, is that co-ops are practical idealistically. That is, they are politically practical. This quote is from the January 27th interview, linked here

“[The] Interesting other thing about [co-ops] which is very important, particularly for liberals and the left to think about: if you’re doing this kind of work and it’s practical and it really is serious, not rhetoric and slogans, you find people who think of themselves as moderates and conservatives — small business people — who say: that’s a good thing to do at the local level. These [co-op worker/owners] are not the national ideologues. And you find…people working hard, they’re trying to better the neighborhood, trying to better themselves, they’re doing productive work. That’s a good idea. And we’re surprised at how you break through ideologies if it’s practical.”

Measuring the Global Co-op Economy

There has been an ongoing effort by the International Co-operative Alliance (ICA) to report on the contribution co-ops have made to the worldwide economy. It is an impressive share of revenue generation, and likely more than most people realize. But co-ops and their success can offer more to the world economy than the traditional value that is based on income produced. Reporting the results of successful co-operatives is becoming more dynamic as the ICA tracks worldwide co-operative progress.

The Global 300

In October 2006, ICA published a report measuring the top 300 co-ops worldwide. The report, called the Global 300, measured the impressive revenue (turnover) created by the world’s biggest revenue generating co-ops. As the Guardian (November 2013) would later point out using Global 300 metrics, “If you still think cooperative groups are limited to small grocery stores in hippie towns, think again. Co-ops have become major forces in the banking, insurance and retail industries.”

By 2010, the Global 300 report listed revenues totaling $1.6 trillion. This put co-ops in 9th place when compared to the GDP of countries. This report put the top 300 into five sectors:

  • Agriculture, the biggest being Zen-Noh in Japan with nearly $57 billion
  • Banking, the biggest being Crédit Agricole Group at almost $104 billion
  • Consumers Goods, the biggest being ReWe Group (Zentral-AktiengesellscharFU) in Germany at almost $50 billion
  • Insurance, with Eureko in the Netherlands making $28 billion
  • Workers, Industrial, Artisanal and Service Producers, with Mondragon in Spain making $23 billion

By the time the ICA had published metrics in the 2013 report, the combined revenues produced by the top 300 co-ops had surpassed $2 trillion.

Beyond Measuring Financial Performance

By 2013, a reformatted report counted over 2000 co-ops worldwide that generated over $2.5 trillion in combined revenue. The financial metrics of the global 300 were still tracked in the report and divided into slightly different categories of: insurance (41%), agriculture and food industries (28%), wholesale and retail (21%), banking (5%), industry and utilities (3%), and health and social care (1%).

But revenue generation is not the only way to measure co-op success. To address other success indicators beyond Global 300 metrics, The World Co-operative Monitor Project was established in 2012, formed by the ICA and The European Research Institute on Cooperative and Social Enterprises (Euricse). The 2013 report, called Exploring the Co-operative Economy, analyzes co-ops more holistically focusing on:

  • Organization Description: metrics that focus on operational model, type of organization, sector of activity, and location.
  • Operational Impact: metrics that describe the organizations members, employees, and volunteers.
  • Financial Performance: reported financial metrics.

As the report says:

“In particular, several researchers focused on the fact that co-operatives’ economic efficiency cannot be evaluated using the traditional economic and financial indicators used to measure for-profit enterprises. It has considered that co-operatives’ goals cannot be simply reduced to profit maximisation or economic and financial wealth, but are for the maximisation of benefit for their members or, in the case of social co-operatives, for the community. As a result, any analysis ought to consider, for example, the difficulties in interpreting the economic profits of co-operatives due to member compensation. Indeed, profits often results in a ‘net zero surplus’ because of the distribution of the gross income to members. On these bases, appropriately adapted financial indicators can contribute to the interpretation of organisational efficiency but cannot be used to evaluate effectiveness.”

A federation of co-ops, for example, can be measured in revenue, number of united co-ops, or number of employees. The world’s biggest revenue-generating agriculture co-op, the Zen-Noh co-op, in Japan generates $64 billion in sales, consists of 1,173 co-operatives, and employs  more than 12,000 people. The Mondragon co-op in Spain, by comparison, generates $19 billion annually, but employs and supports around 80,000 people.

Defining a co-op 

The definition of a co-op can be problematic, as the Guradian points out. The ICA definition: “A co-operative 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.” Further characteristics are defined by the ICA such as values, including equity and solidarity. 

Co-op models vary, and made segmentation necessary for the the “population under study” for Exploring the Co-operative Economy. Co-op types which impact the co-operative economy included:  co-operatives, mutuals, co-operative of co-operatives/mutuals, co-operative groups, co-operative networks, and non-co-operative enterprises.

As time goes on, “the World Co-operative Monitor project intends to propose and promote an improved methodology for data collection and analysis of co-operatives worldwide.”

As an alternative to wealth distribution, co-ops can also redefine how we measure a successful economy.