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Can Worker Cooperatives Solve The Unemployment Problem?
Workers’ cooperatives may not solve unemployment, but they could greatly reduce 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, home prices are rising and corporate profits are at record levels.
Unfortunately, unemployment has remained high long after the recession ended and now stands at 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 not been able to find lasting answers. After the Great Depression the government tried to regulate the economy and stimulate demand to create jobs (the Keynesian way). It worked for a while until the 1970s when we had high inflation and high unemployment (stagflation).
We then had a supply side economy as taxes were cut on the rich and the economy was deregulated. With nothing to control Wall Street, we ended up with the financial crisis in 2008.
Some on the left have suggested restoring the regulations, but that is unlikely to be effective, as companies will find ways to circumvent 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 is what caused the current recession.
One of the ways in which a society can create jobs and socio-economic development is through the system of worker cooperatives, for example, cooperatives that are cooperatively owned and democratically managed by their worker-owners.
HISTORY AND STRUCTURE OF WORKER COOPERATIVES
Cooperative efforts have occurred throughout history since the first humans cooperated with each other for hunting. The co-operative 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 cooperative is not a business in itself, but a business model that sells goods or services just like any other business. The difference lies in the structure of the cooperative. It is democratic, for example, all members make decisions equally and use the process of one member and one vote to make decisions. Each worker has a stake in the cooperative and the company is owned and controlled by the workers.
How might this change the unemployment rate?
Bob Ewing in the Journal of Humanitarian Affairs has a perspective on this, namely that people have different abilities, for example, some can do things, while others have math skills, still others can handle PR. Separately, they cannot run a successful business, but working cooperatively they can.
Some people can’t start their own business because they don’t have all the necessary skills and can’t afford to hire. When the circle widens, the potential resource base expands and this leads to a stronger corporate base (see Worker 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 Argentine model, and cooperatives in America.
THE MONDRAGON MODEL
Probably the most famous cooperative is the Mondragon Cooperative Corporation in Spain. In 1941 a Catholic priest went to the Basque Country to teach at a vocational school and his students founded a small cooperative that has expanded into a vast network of several successful businesses.
Under this model, the management is chosen by the workers and the managers are part of the cooperative process. Each company has a social committee that considers welfare issues; 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 the Oklahoma City Catholic Worker).
Mondragon has its own bank (Caja Laboral Popular) that offers fast financing; has its own insurance cooperative (Lagun – Aro) that offers social security, pensions and medical services. The companies trade with each other and together 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; it has 9,000 students and 85% of its industrial workers are members. It is the first Basque business and the seventh largest in Spain. (Mondragon- Humanity etc).
THE ARGENTINE MODEL
The cooperative system in Argentina was called the “reclaimed factories” movement whereby workers took control of factories or other businesses they had worked in after the factories went bankrupt or after a factory occupation to avoid a shutdown.
As a result of the severe economic crisis of 2002-2003, worker-led companies began to proliferate in a wide range of areas, from car manufacturers to rubber balloon factories. Workers form cooperatives and decisions are made in assemblies, while receiving advice and support from other worker-owned enterprises and government institutions (cooperative economy).
According to Marcela Valente, correspondent of Inter Press Service in Argentina, today there are 205 recovered companies with a total of 9,362 workers and as the economy grows these cooperatives continue to grow. Fifteen percent of recovered companies export part of their production and another 60% have the potential. In recent years, the government has given them a boost by handing out more than a million dollars in grants.
Worker cooperatives 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 unemployed people in the United States. Unions that were once able to raise wages have been weakened with membership at just 11.9% of the workforce. At the same time, global competition has caused corporations to flee in search of global markets.
The flight from manufacturing will not be reversed as overseas production costs are lower. This means that new sources of employment must be found.
The answer, according to Professor Gar Alperovitz of the University of Maryland, lies in looking at local communities. Over the past 3 decades, more than 13 million workers have become owners of their own businesses, 6 million more than private sector union members. There are more than 4,500 nonprofit community development corporations that operate affordable housing, and 130 million Americans are members of cooperatives and credit unions.
“Social enterprises” that transform ownership of capital into businesses have been growing in communities to provide community services.
Cooperatives do make a difference, for example, in Cleveland, a group of worker-owned companies, backed by the purchasing power of major hospitals and universities, have taken the lead in developing “green” projects capable of creating thousands of jobs (America Beyond Capitalism by Gar Alperovitz).
But much more needs to be done. In the private sector there are billions of dollars sitting idle in the banks (testimony to the failure of the trickle down economy); the unavailability of capital is the biggest barrier to the formation of cooperatives and the main reason why they have not grown further. Interest rates are very low, so the government should borrow these funds and use them to provide vital start-up capital for new businesses, especially for the unemployed and minorities, as these groups find it difficult to get 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 WORKER COOPERATIVES
The catalyst for workers’ cooperatives has mainly been the harsh economic conditions in Great 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, it is likely that a world war will not 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 way of life, a good standard of living, employment 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 seize the moment 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
Reviewed September 29, 2013
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