Workers’ cooperatives may not solve unemployment, but they could go a long way toward 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.
Sadly, unemployment has remained high long after the recession ended and is now around 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 (in the Keynesian way). It worked for a time until the 1970s, when we had high inflation and high unemployment (stagflation).
Then we had the supply-side economy as taxes on the rich were cut and the economy deregulated. With nothing to keep Wall Street in check, we ended the 2008 financial crisis.
Some on the left have suggested restoring the regulations, but that is unlikely to be effective, as companies will find ways to bypass or even eliminate them if they have a business-friendly Congress, as has happened in the past.
Then there are those on the right who advocate deregulation, but that’s what caused the current recession.
One way a society can create jobs and socio-economic development is through the worker cooperative system, for example cooperatives that are owned by cooperatives and democratically managed by their worker-owners.
HISTORY AND STRUCTURE OF THE WORKERS ‘COOPERATIVES
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 the depressed economic conditions caused 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 a business model that sells goods or services like any other business does. The difference lies in the structure of the cooperative. It is democratic, for example, all members are equal in decision making and use the process of one member, one vote to make decisions. Each worker owns a stake 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, 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 they can work cooperatively.
Some people cannot start their own business because they lack all the necessary skills and cannot afford to hire. When the circle widens, the potential resource base widens and that leads to a stronger corporate base (see Workers 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 Mondragon in Spain, the model in Argentina, and cooperatives in America.
THE MONDRAGON MODEL
Probably the most famous cooperative is the Mondragón Cooperative Corporation 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 several successful companies.
Under this model, management is elected by workers and managers are part of the cooperative process. Each company has a social committee that deals with welfare matters; 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).
Mondragon has its own bank (Caja Laboral Popular) that provides an immediate offer of financing; 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-sufficient economic community independent of the national economy (Mondragon-Humanity at Work).
Mondragón has created 83,859 jobs in Spain in the areas of finance, industry, distribution and knowledge; It has 9000 students and 85% of its industrial workers are partners. It is the first Basque company and the seventh in Spain. (Mondragón- Humanity etc).
THE ARGENTINA MODEL
The cooperative system in Argentina was called the ‘recovered factories’ movement whereby workers took control of factories or other businesses in which they had worked after the factories went bankrupt or after the occupation of a factory to avoid a lockout.
As a result of the severe economic crisis of 2002-2003, worker-run companies began to proliferate in a wide range of areas, from automobile producers to rubber balloon factories. Workers formed cooperatives and decisions are made in assemblies, while receiving advice and support from other worker-owned companies and government institutions (cooperative economy).
According to Marcela Valente, Inter Press Service correspondent in Argentina, today there are 205 companies recovered with a total of 9362 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.
Workers ‘cooperatives have also been developing in other Latin American countries: there are 69 companies recovered in Brazil, 30 in Uruguay, 20 in Paraguay, and a growing number in Venezuela (Great growth of workers’ cooperatives in Argentina by Marcela Valente) .
WORKERS ‘COOPERATIVES IN AMERICA
There are 23 million unemployed people in the United States. Unions that were once able to raise wages have 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 leakage from 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 Professor Gar Alperovitz of the University of Maryland, lies in observing local communities. In the last 3 decades, more than 13 million workers have become owners of their own businesses, 6 million more than members of private sector unions. There are more than 4,500 nonprofit community development corporations operating affordable housing, and 130 million Americans are members of cooperatives and credit unions.
The “social enterprises” that transform capital ownership into businesses have multiplied in communities to provide community services.
Cooperatives make a difference, for example, in Cleveland, a group of worker-owned companies, backed by the purchasing power of large hospitals and universities, has taken the lead in developing “green” projects capable of creating thousands of jobs (America Beyond Capitalism by Gar Alperovitz).
But much remains to be done. In the private sector there are billions of dollars idle in the banks (testimony to the failure of the trickle-down economy); The lack of availability of capital is the greatest 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 startups, especially the unemployed and minorities, as these groups find it difficult to obtain loans.
The concept of worker cooperatives is still in its infancy in America, but they have real potential as a source of much-needed jobs.
THE CATALYST OF WORKERS ‘COOPERATIVES
The catalyst for worker cooperatives has mainly been harsh economic conditions, as in Great Britain after the Industrial Revolution and in Argentina at the beginning of the century. It is interesting to note that in Argentina as the economy grows, worker-run factories continue to operate strongly, suggesting some element of viability.
In the age of nuclear energy, a world war is unlikely to be able to rescue us as was the case with World War II and the Great Depression.
Workers’ cooperatives are not the only answer to unemployment, but they can provide their members with a good lifestyle, a good standard of living, work and social security.
The United Nations declared 2012 THE YEAR OF THE COOPERATIVE to raise public awareness of the invaluable contribution of cooperatives to poverty reduction, job creation and social integration. The unemployed should be sixteen years old and adopt 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
Revised September 29, 2013