Robert Reich: Co-ops are important for resolving the dilemma of widening inequality

Named one of the ten most effective cabinet secretaries of the 20th century, Robert Reich is one of the keynote speakers at the International Summit of Cooperatives in...

Named one of the ten most effective cabinet secretaries of the 20th century, Robert Reich is one of the keynote speakers at the International Summit of Cooperatives in Quebec.

A globally acclaimed political commentator and author, Prof Reich has written 14 books, the latest being Saving Capitalism, which questions the free market ideal. Inequality has been a recurring topic in his books and will also be the theme of his presentation at the Summit.

Prof Reich's latest book
Prof Reich’s latest book

“Co-ops have a record of generating good products or services and high productivity because everyone has a stake in their success,” he explains. Prof Reich first became acquainted with co-ops in his teens. “In my hometown in the upper New York state there were retail co-ops run by employees, and I learned how well co-ops can work at the retail level,” he recalled. Later, while studying at Harvard, he learned about the various forms of co-ops. Since then he has written about the US and the global economy and talked about co-ops based upon his research.

In 2008, the Wall Street Journal placed him sixth in the list of the most influential business thinkers. He is currently Chancellor’s Professor of Public Policy at the University of California at Berkeley. Asked what were the sources of inequality in the USA, Prof Reich said: “The rich are becoming far richer than they’ve been in over a century and the middle class in the USA and in Canada is under great stress. Canada is moving in the same direction as the USA. The wages of most people are going nowhere.

“While the chief executives of big corporations and financial firms and major investors are doing exceedingly well, the typical citizen of the USA or Canada is not sharing in the economic gains of our nation which is exactly why moving towards a different structure of enterprises – such as the co-op model – is very important and relevant.”

We are too focused on the shareholder and maximising shareholder return – and too little focused on the well-being of employees and communities

Prof Reich’s book leads from the idea that the free market is a human invention – therefore someone is always writing the rules of the market, particularly wealthy elites and big corporations. He argues in the book that this version of “top heavy capitalism” cannot be sustained. Does he think co-operatives make a positive contribution?

“Yes, I think co-ops help improve the system,” he says. “The entire world is now capitalist except for a few limited areas. Even China is moving towards capitalism.

Logo of the 2016 International Summit of Cooperatives
Logo of the 2016 International Summit of Cooperatives

“The question is no longer communism or capitalism, the real question is, what type of capitalism? Is it a capitalism that improves almost everyone’s incomes and increases almost everyone’s wealth or is it a capitalism that works on behalf of a relative few, where most of the gains go to the very top?

“Capitalism can be organised in a wide variety of ways. In the USA we had one form of capitalism between the Second World War and the late 1970s which might be called ‘stakeholder’ capitalism, in which big companies had responsibility towards workers and communities as well as shareholders. Since the 1980s, the model has been shareholder capitalism, in which big companies thought of their responsibilities only in terms of maximising shareholders’ value. Co- ops can help Canada and the USA and other countries return to shared prosperity and a more stakeholder-centred capitalism.”

Programme announced for International Summit of Cooperatives

In terms of incentives, he thinks the USA could benefit from legislation that provided more tax advantages to organisations that become co-ops.

“We are too focused on the shareholder and maximising shareholder return – and too little focused on the well-being of employees and communities,” he said.

“I’m not suggesting that co-ops are the entire answer, but they are a step in the right direction. One of the major economic advantages of co-ops is that everyone shares in the gains, and that widens the circle of prosperity, helps reduce inequality, and spurs employees to become more productive.”

While elections are coming up in the USA, co-ops have not been on the agenda of candidates.

Robert Reich speaking at the 2015 Liz Carpenter Lecture
Robert Reich speaking at the 2015 Liz Carpenter Lecture

“Both Democratic candidates have talked about changing incentives on companies so that they more broadly share in their profits but neither has said anything specifically about co-operatives,” commented Prof Reich, who endorsed Bernie Sanders for president.

International Summit of Cooperatives to discuss innovation and technology

The economist served in the administrations of Gerard Ford and Jimmy Carter and in 1993 he was offered a position in Bill Clinton’s administration. The two had met as Rhodes scholars at Oxford and Prof Reich had advised Mr Clinton during his campaign.

He joined the team as secretary of labor. The Democrats had not been in power for 12 years. Prof Reich’s work did not directly involve co-operatives, but he thinks that a number of policies in terms of labour markets, pensions and practices impacted on the enterprise model. “In the 1990s our focus was on getting family and medical leave, and raising the minimum wage (which we succeeded in doing) – while at the same time, reducing workplace injuries and protecting pensions.”

When it comes to the labour market, technology remains a key concern and it is posing a challenge to co-operatives as well. Prof Reich thinks that co-operatives “have every incentive to use technology” because their members would be the one benefiting the most.

“The members benefit, employees benefit and the executives benefit – incentives are properly aligned,” he said.

Innovation and technology are key themes that will be discussed at the International Summit in Quebec, which also features globally acclaimed speakers Navi Radju, Joseph Stiglitz, Mark Kramer and Jeremy Rifkin.

Commenting on his participation at the summit, Prof Reich said: “I’m looking forward to talking with people from all over the world and learning about their experiences with co-ops and learning best practices, what seems to be working best and what can be tried in the USA.”

  • The International Summit of Cooperatives takes place in Quebec on 11-13 October 2016. For more information, visit www.sommetinter.coop/en
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