Madison cooperatives offer an alternative to a system of haves and have-nots

From   Protesters flood the street, chants and song punctuated by drumming and the low, steady honk of a tuba. Sign after sign decries the attack against...



Protesters flood the street, chants and song punctuated by drumming and the low, steady honk of a tuba. Sign after sign decries the attack against nurses, teachers and sanitation workers; others demand a living wage in bold letters. A man stands before a podium addressing the masses, crying, “Those who need the increases least get most, and those that need them most get least!” The crowd erupts in response. Sound familiar?


But this isn’t Madison in February 2011. This is grainy footage of 1980s Britain in the throes of worker unrest, from the opening scenes of a BBC documentary on the Mondragon Corporation in Spain.


In the 1940s, the civil-war-ravaged Basque region of Spain had 40% to 50% unemployment. Today, a transformed Mondragon is a federation of worker-owned cooperatives, responsible for some 80,000 jobs across more than 250 finance, industrial, retail and knowledge-based companies. It is also the model upon which an increasing number of Madison-area worker co-ops are based, and some say it’s the solution to our current capitalist-fueled quagmire.


“The nature of the local economy and the creation of jobs seems to be the most important issue on everyone’s mind,” says Madison Mayor Paul Soglin. “It seems to me that if we’re talking about a robust economy, we need to discuss the role of co-ops in that economy.”


This might sound like the start of a lusty, utopian love letter for hippie socialist Madisonians, but it’s not. Worker cooperatives are a viable, valuable economic tool used worldwide to create jobs and sustainable communities, and despite the existence of several successful worker co-ops here in Madison, they still fly well below the radar. The good news: Although the United States is behind the curve, Madison is actually ahead of it.


It’s not that we don’t get cooperatives. Many of us have a membership to a consumer cooperative like Willy Street Co-op or REI, and the tapestry of Wisconsin is thickly threaded with agricultural and utility cooperatives. There are housing and marketing cooperatives throughout the state, and according to the UW Center for Cooperatives, Wisconsin boasts about 844 co-ops representing 2.7 million members, contributing $5.6 billion in gross sales to the state economy.

But the worker co-op, as defined and organized by Wisconsin State Statute Chapter 185, remains a bit of an enigma despite its simple premise.


“Sometimes I think that people think worker co-ops are more of a thing than they are,” says Madison attorney Scott Herrick, the go-to lawyer in Madison for co-ops. He even helped revise and update Chapter 185 more than two decades ago. “One of the things I tell people is, ‘Hey, this is not religion. This is not theology. It’s a tool, it’s an instrument…and it’s underused.'”


In a worker co-op the people invest in, own and control the business. This is not to be confused with “employee-owned,” in which your payoff is determined by how many stock shares you can afford to purchase. In a worker co-op the principle is “one worker, one vote,” and all decisions are made democratically. Profit — referred to as surplus — is distributed among the workers as they see fit. If a producer cooperative is a system in which farmers, for example, are banding together to collectively sell milk, in a worker co-op you’re essentially banding together to market and sell your labor.


There’s more to it, of course, depending on the individual business, and there’s no doubt that the model itself attracts a certain type of personality. But because the model is not burdened by a mandate to deliver a large financial profit to investors or a single owner, the worker co-op model is sustainable, local and less vulnerable to the availability of outside capital. The money is spent locally, and the jobs stay here.


“There isn’t a little sprinkling of virtue dust in Chapter 185 compared to Chapter 180 [Wisconsin’s business corporation codes],” says Herrick. “But the advantage that the co-op model has at the margins can be really important when times are difficult. I’m not sure that other people in the business stress it as much as I do, but to me it really stands out.”


The UW Center for Cooperatives estimates there are eight or nine worker cooperatives in Madison, including Union Cab, Isthmus Engineering, Just Coffee, Community Pharmacy, Interpreters’ Cooperative of Madison, Lakeside Printing, Nature’s Bakery and Union Technology Cooperative. There are probably others operating effectively as worker co-ops but organized legally as limited liability companies (LLCs), especially if they have fewer than five members (the required number for a worker co-op in Wisconsin).


That may not sound like many, but it’s more than most.


“You can’t even organize as a worker co-op in 13 states in the country,” says Rebecca Kemble, a Madison anthropologist who writes for The Progressive magazine and drives for Union Cab. “We don’t even have national legislation that covers worker cooperatives. The U.S. is at the bottom of the list in worker co-op development.”


Kemble is the president of the North American sub-region of CICOPA (and vice president of CICOPA Americas), the worker co-op arm of the International Cooperative Alliance, which is the largest non-governmental organization in the world. It represents a billion members.


According to Kemble, there are three key regions in the U.S. when it comes to worker cooperative development. One is the Pioneer Valley in Western Massachusetts, one is the California Bay Area, and one is Madison. Kemble is also board president of the U.S. Federation of Worker Co-ops, itself a member of CICOPA, and she estimates there are more than 300 worker co-ops throughout the U.S., employing more than 3,500 people and generating more than $400 million in annual revenues. USFWC membership has grown 25% in the last two years, and before Kemble held the position it was occupied by her Union Cab colleague John McNamara.


“In Madison,” says Kemble, “we have connections to the whole world of worker co-ops, and a voice in decisions made globally about how worker co-ops will have a voice in the larger co-op sector.”


Union Cab is a Madison staple, but it is also one of the country’s legendary worker co-op success stories. There was a labor strike in 1978, back when the company was known as Checker Cab. The workers organized, Checker Cab shut down, and by the summer of 1979 the employees had reorganized and incorporated as Union Cab.


Since that day, Union Cab has been fully worker-owned. Each of the 220 drivers, mechanics, dispatchers and administrative workers owns an equal share of the company — for a $25 buy-in — and has an equal vote in many operations, including electing a board of directors. Through the board of directors, Union Cab workers vote themselves the fair wage, benefits and working conditions virtually unheard of in their industry, and the business still thrives.


The average wage at Union Cab is roughly $14.48 an hour, plus 60% health insurance, paid days off, safe-driving bonuses and end-of-year surplus sharing. There are also dozens of revolving committees, and general manager McNamara estimates at least 50% of members “are in some way engaged in the decision-making process outside of their job.”


“Everybody here has a legitimate, vested interest in the company,” says McNamara. “We are all part of something bigger — it’s not just a job. So you are going to go out of your way to be safe, out of your way to provide customer service.”


Union Cab is a $6.5 million-a-year business, and McNamara says with the exception of liability insurance, “almost every penny of that goes directly back into the Madison community.” Union members buy their health insurance from Group Health Cooperative and their gasoline from Landmark Cooperative. They eat and shop and pay rent in the community; they have an official buy-local policy; and there is zero incentive to, say, ship their call center overseas.

“In a worker co-op you’re able to keep the surplus with the workers,” says McNamara, “and that goes back to the community directly.”


Although it’s not in any way a job requirement, McNamara’s commitment to the cause goes far beyond Union Cab. In addition to his involvement with the U.S. Federation of Worker Co-ops he helps other worker co-ops get started, in alignment with the Seven Principles of Cooperatives, one of which is “Cooperation among Cooperatives.” Locally, Madison’s worker co-ops band together as MadWorC, swapping business strategies and problem-solving common issues.


“The original co-op leaders were people who believed in working together to keep the fire burning for everybody’s benefit, not trying to sell heat to their neighbors,” says McNamara. “It’s about an honest business that’s designed for the sustainability of the community, not for just making one or a small group of people a profit at the expense of other people.”


It’s a sentiment shared by MadWorC member Matt Earley of Just Coffee, a Madison company founded by Earley and Mike Moon as an LLC in 2001. As soon as they had enough members to legally reorganize as a worker co-op, they did.


“We feel like it’s the only way to do things,” says Earley. “Nobody’s getting wealthy, sure, but that’s the whole point.”


Today Just Coffee has eight worker-owners and six employees, and the core mission is global responsibility. They build long-term relationships based on “transparency, equality and human dignity” with small-scale coffee growers around the world and often pay more for the product than anyone else, well above the Fair Trade standards. Every bag of coffee can be easily traced by consumers — everything from where the beans originated to how much the farmer was paid, and the line of cooperatives Just Coffee worked with along the way.


“I definitely think that the goal has to be to consciously work away from this model where it’s one or two people owning or running a business and making all the money off of it,” says Earley. “Those business decisions have to be made with the logic to make those people money, which is paying workers as little as possible and paying as little as possible for the products you’re selling. Our larger goal is to try to help build a model of economic democracy.”


It’s undeniable there’s a feel-good mission behind certain cooperatives, but it’s about so much more than politics. A cooperative is every bit a business as a Fortune 500 corporation, and any business is only as good as its plan. Yes, some are driven by a moral imperative, but others just think it makes really good business sense.


As Lynn Pitman of the UW Center for Cooperatives puts it, “If you try to pigeonhole cooperatives by where they are along a simple left-right political spectrum, you run into problems really quickly.”


Isthmus Engineering is a worker co-op founded in 1980 as a partnership, and reorganized in 1983 as a worker co-op. Industrial cooperatives are a stronghold in Italy and Spain, where Mondragon is located, but they are not as common in America. What’s interesting is how well Isthmus Engineering has fared in an era when production is dying out.


“I once worked for [Giddings & Lewis, based in Fond du Lac], the largest machine tool manufacturer in the western hemisphere,” says electrical engineer Ole Olson. “I was there for eight years and the company was bought and sold three times. Now a German company bought them and has them building German machines. They had 7,500 people when I was there, and they’re probably down to 100. This huge American company is gone, and that’s kind of what corporate America has become.”


Isthmus Engineering designs and builds custom, innovative machines for other companies, including many Fortune 500 clients. The company is 100% worker-owned, but not everyone who works there is an owner. Out of 50 people in the building, 30 are currently owners. Everybody starts out as an employee for the first two years, with competitive salary and benefits. After two years you have the option to buy in, subject to a three- to five-month application process and 90% approval vote of the other worker-members.


Every decision is made democratically, with one member, one vote. Everything is transparent, and wages are varied and competitive. “If your peers value what you bring more, you get paid more,” says one member.


The collective buy-in ensures worker engagement and investment. They win and lose together, so they’re tightly invested in the outcome. This pays off in dividends with customers, who are almost always interacting face-to-face with an owner of the company.


At a time when so many of their competitors are no longer standing, Isthmus Engineering has a new, state-of-the-art, 65,000-square-foot building and a full roster of projects. It’s not that they haven’t felt the sting of the economic downturn; it’s that their model gives them the ability to react and adapt quickly to the market and the structure to problem-solve creatively.

Plus, there’s no way they’ll be bought out.


“We’re not going to move production to some place that can be done cheaper,” says Olson, because they are the production. “We’re going to change the business so that it can be competitive in this community.”


This model is not without its challenges, of course, not least of which is a lack of awareness among the public, the government and even cooperatives themselves. But that’s all changing.


The Summit Credit Union hosted the first annual “Co-op Connection” at Monona Terrace Convention Center in October. Also last fall, several Madison-area worker cooperatives were visited by a film crew shooting a documentary called Shift Change: Putting Democracy to Work. The crew recently wrapped filming at Mondragon in Spain.


And the United Nations has declared 2012 the “International Year of Cooperatives.” In June, Madison will host a conference to explore the role of cooperatives in city planning and economic development.


Meanwhile, the UW Center for Cooperatives continues to be a national focus of attention for spearheading an ongoing USDA-funded research project that would analyze, for the first time, the economic impact of cooperatives in America.


What is already known is that the U.S. lacks much of the co-op-friendly legislation other countries have in place. In Spain and Italy, for example, workers can take their unemployment benefits in one lump sum if they use that money to invest in a worker co-op. In Quebec, successful cooperatives are discouraged from selling out to larger corporations because of a law that requires, upon sale, 40% of the remaining assets to go back into a national cooperative development fund.


The U.S. also lacks the supportive infrastructure found in these other countries, what’s known as “second- and third-tier cooperatives.” These are essentially cooperatives of cooperatives. They provide resources and collective business and social services, so each new co-op isn’t reinventing the wheel by starting at ground zero and problem-solving common cooperative issues independently.


Arguably the biggest challenge of all is the psychological barrier. Thinking a whole new way can be overwhelming at a time when people are just trying to hang on to the job they have — if they still have it. But in nearly every region of the world where cooperatives have a stronghold, they were born as a result of a collapsed economy and social unrest. In Argentina alone, where a 2001 financial crisis sparked a complete economic meltdown, there are now 6,000 worker cooperatives.


MadWorC reports getting a lot of new interest from state workers — victims of recent privatization efforts and budget cuts who are finding themselves suddenly unemployed. What if they banded together to collectively market and distribute their skills?


“In places like Spain and France and Italy we’re talking about hundreds of thousands of jobs, thousands of business enterprises, and a level of organization where social services and public education are organized by the worker cooperatives,” says Kemble. “It’s quite stunning. And where they really take root are where the traditional, global capitalist way of organizing finance and production has failed people.


“This is not an ideological project,” adds Kemble, who is convinced the current economic downturn is providing ripe conditions for worker co-op development across the U.S. “It’s a very practical project.”


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