Can Worker Cooperatives Solve The Unemployment Problem?

Worker cooperatives might not solve unemployment but they could go a long way 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 rebounded, housing prices are going up and corporate profits are at record high levels.

Unfortunately unemployment has stayed high long after the recession ended and now hovers at around 7.3 %. What we have is a jobless recovery.

A look at history over the past eighty years shows that our leaders have not been able to find lasting answers. After the Great Depression government tried to regulate the economy and stimulate demand to create jobs (the Keynesian way). It worked for a while until the 1970’s when we had high inflation and high unemployment (stagflation).

We then had supply side economics as taxes on the wealthy were cut and the economy was deregulated. With nothing to keep Wall Street in check, we ended up with the financial crisis in 2008.

Some on the Left have suggested restoring regulations but that is hardly likely to be effective as companies will find ways of circumventing them or even getting them removed if they have a company friendly Congress as has happened in the past.

Then there are those on the Right that advocate deregulations but that was what caused the present recession.

One way a society can create jobs and socio-economic development is through the system of worker cooperatives, for example coops that are cooperatively owned and democratically managed by their worker-owners.

HISTORY AND STRUCTURE OF WORKER COOPERATIVES

Cooperative efforts have occurred throughout history since early human cooperated with each other for hunting. The cooperative as a modern business structure originated in 19th century Britain when people banded together in response to the depressed economic conditions brought on 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 coop is not a business unto itself but a business model that sells goods or services just as any other business does. The difference rests in the cooperative’s structure. It is democratic, for example all members are equal decision-makers and employ the one-member, one vote process of making decisions. Each worker owns a share in the coop and the enterprise 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 i.e. people have different skills, for example some can make things, while others have math skills, still others can handle public relations. Separately they can’t run a successful business but working cooperatively they can.

Some people cannot start their own business because they lack all the skills needed and can’t afford to hire. When the circle is expanded the potential resource base widens and that leads to a stronger corporate foundation (see Workers 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 Mondragon in Spain, the Argentine model and coops in America.

THE MONDRAGON MODEL

Probably the most famous coop 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 coop which has expanded into a vast network of various successful businesses.

Under this model management is elected by workers and managers are part of the cooperative process. Each enterprise has a social committee that considers welfare matters; capital is borrowed and employees become worker-owners and surplus is distributed between them and consumers (Mondragon: A better way to go to work? by the Oklahoma City Catholic Worker).

Mondragon has its own bank (Caja Laboral Popular) which provides a ready supply of financing; it has its own insurance coop (Lagun – Aro) which provides social security, pensions and medical services. The enterprises 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; has 9000 students and 85% of its industrial workers are members. It is the foremost Basque business and the 7th largest in Spain. (Mondragon- Humanity etc).

THE ARGENTINE MODEL

The system of cooperatives in Argentina was called the ‘recovered factories’ movement whereby workers took control of factories or other businesses where they had worked after the factories had become bankrupt or after a factory occupation to circumvent a lock out.

As a result of the severe 2002-2003 economic crisis, worker-run companies began to mushroom in a broad range of areas from car producers to rubber balloon factories. Workers formed coops and decisions are reached in assemblies, while they receive 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 recovered companies with a total of 9362 workers and as the economy grows these coops are still growing. Fifteen percent of recovered firms export part of their output and another 60% have the potential. In the last few years the government has given them a boost by distributing more than $1 million in subsidies.

Worker coops 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 (Big Growth of Worker Coops in Argentina by Marcela Valente).

WORKER COOPERATIVES IN AMERICA

There are 23 million people unemployed in America. Labor unions which once could raise wages have weakened with a membership of only 11.9 % of the labor force. At the same time global competition has caused corporations to flee to seek global markets.

The flight of manufacturing industry will not be reversed as overseas production costs 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 looking at local communities. Over the last 3 decades more than 13 million workers have become owners of their own companies 6 million more than members of unions in the private sector. There are more than 4500 non-profit community development corporations that operate affordable housing and 130 million Americans are members of coops and credit unions.

“Social enterprises” which transform ownership of capital into businesses have been mushrooming in communities to provide community services.

Coops do make a difference so for example in Cleveland a group of worker-owned companies, supported by the purchasing power of large hospitals and universities have taken the lead in developing “green” projects capable of creating thousands of jobs (America Beyond Capitalism by Gar Alperovitz).

But a lot more needs to be done. In the private sector there are billions of dollars sitting idle in banks (testimony to the failure of trickle down economics); unavailability of capital is the biggest barrier to the formation of coops 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 enterprises especially for the unemployed and minorities since these groups have difficulty in securing loans.

The concept of worker cooperatives is still in its infancy in America but they have true potential as a source of badly needed jobs.

THE CATALYST OF WORKER COOPERATIVES

The catalyst of worker cooperatives have 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 are still going strong suggesting some element of viability.

In the age of nuclear power, a world war is not likely to be able to bail us out as was the case with World War II and the Great Depression.

Worker coops are not the sole answer to unemployment but they can provide for their members a good way of life, a good standard of living, job and social security.

The United Nations declared 2012 THE YEAR OF THE COOPERATIVE to raise public awareness of the invaluable contribution of coops to poverty reduction, employment generation and social integration. The unemployed should seize the moment and adopt this alternative model of doing business. It is a far better option than waiting for government or the private sector to act.

Victor A. Dixon
September 2, 2012
Revised September 29, 2013