Worker Cooperatives: Myths vs. Facts

February 18th, 2012

By Jim Anderson and George Cheney

The Great Recession has taken a huge toll at all levels of society. Happily, there are some signs of recovery. However, we still need inventive, long-term solutions to develop the economy, create jobs, and build collective wealth. We also need creative leadership to build momentum in our communities.  Intensive employee involvement within a culture of high performance makes enterprises work.  Employee-owned businesses, organized as cooperatives, deserve serious consideration across the country.  Yet, there are a number of myths about cooperatives.  We discuss these myths and offer our ideas on how to get beyond them.

Myth #1:  Worker cooperatives are a form of state socialism.

Fact: Co-ops are not centralized programs but rather grassroots economic development initiatives. Worker cooperatives are a type of capitalist enterprise but with strong local and social commitments. The equity or worth of co-ops is not publicly traded in the stock market; nor are these firms subject to the whims of distant owners. Worker co-ops distribute ownership among members, who are all invested equally in the company and its successes. Employees are also nearby residents and consumers; they build on local pride through being owners in their workplace, and they keep earnings in the community, creating a multiplier effect in the local economy. This is the strategy being pursued now in Cleveland’s Evergreen cooperatives, which employ neighborhood residents who then work together to elevate their sector of the city.

Myth #2:  Worker cooperatives are not for profit. 

Fact: The vast majority of worker coops are actually private for-profit firms.  Moreover, they need viable product or service niches to survive. Funds to support growth in market share and employment are sourced in the profits of the enterprises. If there’s no margin, there’s no mission.  Conversely, if there’s no mission, there’s no soul to the enterprise.  Financial solvency is essential, but so are the commitments to customers, stakeholders, and community. Along these lines, many worker co-ops make reinvestment in the community a part of their financial structure and regular operating procedure. In fact, for many worker cooperatives, a significant proportion of proceeds is automatically reinvested in the community, as is the case with a number of food-producing co-ops in the Bay Area.

Myth #3: Worker cooperatives do not have–or need–managers and other experts.

Fact: Leaders are needed in all enterprises regardless of the ownership structure. Worker co-ops enlist various kinds of expertise while also encouraging worker-owners to develop their skills to advance in the company to leadership positions. Effective worker co-ops employ an array of professionals, including experienced managers, accountants, engineers, attorneys, marketers, and so forth, along with workers who are close to the basic products or services.  Worker-owners have opportunities for advancement and leadership; they also benefit from the company’s commitment to them. In this way, worker co-ops often practice the best version of transformational leadership, by including younger generations in decision and policy making and preparation for the future. Worker cooperatives practice shared responsibility, making leadership succession a smooth process.

Myth #4: Worker cooperatives are not compatible with unions.

Fact: This is not an either-or matter. Worker-owned enterprises have a variety of relationships with organized labor. They share a common interest in support of the dignity of human labor and the rights of employees, as is being shown right now with new projects in Pittsburgh and Cincinnati. Those efforts enjoy the support of both existing worker cooperatives and the United Steelworkers, among other unions. The worker-owners of a particular firm may have a formal or informal relationship with organized labor, may choose to unionize all or part of the co-op, or may elect to have no connection with unions at all. The point is that the unity of labor and capital that is a principle of a worker co-op doesn’t necessarily determine a specific relationship with unions. Worker-owners will select their own union or non-union path.

Myth #5: Worker cooperatives suppress creativity and innovation.

Fact: Worker cooperatives are all about entrepreneurship and innovation, while meeting community economic and social needs and growing toward the future.  This is shown clearly in a range of worker co-ops engaged in niche manufacturing, high tech, and green business. Beyond mere survival, worker cooperatives use a mix of individual and group incentives to encourage new ideas and their applications. Each member is literally an owner of the firm; at the same time, opportunities exist for team and individual bonuses and advancement. In this regard, worker cooperatives take advantage of the full range of human motivations for work and success. Further, the array of incentives actually makes worker cooperatives more resilient than many traditional firms in both good and bad economic times.

Myth #6: Worker cooperatives cannot grow to have a big impact on community economic development.

Fact: The cooperative economy focuses on small and medium business development, but many of these businesses grow through acquisitions, mergers, and strategic alliances. In fact, most large businesses began as smaller enterprises. Ultimately, through collaboration as well as healthy competition, worker cooperatives can become stable parts of urban as well as rural economic mixes. The seventh largest private firm in Spain is in fact a worker-owned-and-governed business in the Basque Country. Closer to home, we see efforts to foster broader “cooperative economies” in cities as diverse as Austin, Boston, and Minneapolis.

Myth #7:  Worker cooperatives are short-term enterprises.

Fact:  Stakeholders in businesses, whether traditional or cooperatively owned, are committed to long-term success. Very few organizations of any kind, regardless of sector or industry, last more than a few decades.  Some worker cooperatives are large, well-established enterprises that have become part of the economic bedrock of their communities and regions. The Mondragon Cooperative Group in the Basque Country of Spain is 56 years old and going strong. .

Myth #8: Worker cooperatives are feasible only for a few kinds of business.

Fact: There are thriving worker cooperatives in U.S. businesses ranging from agriculture and food and beverage services to clothing and household appliance manufacturing to law and journalism to transportation to high tech and alternative energy development. The worker-cooperative model is not one-size-fits-all but rather one that can be adapted to specific business, sector, and community needs.

In sum, the worker cooperative is a flexible and well-tested model that should be part of the tool kit of effective and democratic responses by policy makers and business leaders to today’s community and global economic needs. Worker co-ops can be designed to take advantage of market niches, fit community needs, and build stable, prosperous, and just enterprises

 

Jim Anderson, Program Coordinator, Ohio Employee Ownership Center, Kent State University, Kent, Ohio

Tel.: 330-672-0999 (o)

Jander77@kent.edu

 

George Cheney, Professor, School of Communication Studies, Kent State University, Kent, Ohio; Advisory Board, Cooperation Texas, Austin, TX

gcheney@kent.edu

Tel.: 330-672-2659 (o)

 

For further information, please consult the following resources:

  • Cooperative Curriculum http://cooperative-curriculum.wikispaces.com/
  • Industrial Cooperatives Association (ICA Group) http://www.ica-group.org/
  • Ohio Employee Ownership Center http://www.oeockent.org
  • Mondragon Cooperative Corporation http://www.mondragon-corporation.com/ENG.aspx
  • National Cooperative Business Association http://www.ncba.coop
  • Cooperation Texas http://www.cooperationtexas.coop
  • US Federation of Worker Cooperatives http://www.usworker.coop

 

 

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One Response to “Worker Cooperatives: Myths vs. Facts”

  1. Worker Cooperatives, and cooperatives in general, are not a form of capitalism. They are, however, another form for a market based economy. We need to quit being afraid of being red-baited. Socialism is a political movement, not an economic one. Socialist countries can use capitalism, cooperation or state-managed economics. China is a great example of a socialist country that uses capitalism as an economic model.
    Cooperatives are not “capitalist” because they put the human being, not the dollar, at the center of the equation. Capitalism clearly puts the dollar as the central unit. This is the key difference.

    For more on this check out Cooperative Enterprise by Stefano and Vera Zamagni. They also present a supply-side argument for co-operatives.

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