2001 Nobel Prize laureate, Michael Spence, on co-ops, the global recession and the International Summit

Nobel Prize winner for Economic Sciences, Michael Spence, is one of the keynote speakers at the International Summit of Cooperatives in Quebec. He believes that co-ops are a...

Nobel Prize winner for Economic Sciences, Michael Spence, is one of the keynote speakers at the International Summit of Cooperatives in Quebec. He believes that co-ops are a "a very important form of organisation" during the current economic climate.

Professor Spence will be speaking at the 'Opening session on Co-operative Economy' on Monday 8 October. 

The leading American economist explained he could not yet assess whether co-ops have coped better with the financial crisis, but it seemed to be the case within the financial sector.

Professor Spence explained how misconceptions about the financial crisis have surrounded it in a “mystifying” aura; with people knowing something went wrong, without understanding what exactly happened.

“People’s confidence in the system seems to have been affected. They are pretty cynical by now and the global economy is evolving. It is difficult to understand what these forces are. It is a very confusing time for people,” he said. 

According to Professor Spence, co-operatives can make a difference within local communities, but in order to be able to address the North-South gap they need to co-ordinate their efforts at global level.

“In a number of developing countries co-ops have a kind of flexible format, but in the global economy there is going to be a fairly broad attempt to allow economic and social objectives.

“In developing economies there is a variety of rates of growth, one of them is underlying a process of bringing people who are unemployed within the traditional sectors into a different part of the economy: the modern and more productive part of the economy. There are barriers to that.

“Co-operatives, in a variety of ways… through education and training associations, can definitely contribute to growth,” he said.

Professor Michael Spence believes that although policy instruments can prove to be ineffective in today’s conditions, co-ops can enable people to come up with a common solution to the crisis by sharing responsibility.

“There are many issues you can address on the supply side, but when there are shocks to the system, because of the way they are organised, co-ops can keep people into work by sharing the burden of shocks.”

Professor Spence explained how co-ops “cannot make up for the shortage in the domain in the economy” and that patiently waiting for the demand side to come back is the only way to address this issue. Nevertheless, the recipient of the 2001 Nobel Memorial Prize in Economic Sciences believes “co-ops can be helpful in the transition.”

In Professor Spence’s view, the co-operative enterprise model could justify the form of organisation through its efficiency, but it should also to be based upon some values that relate to the distribution of income such as “careness, equality and fairness.”

Michael Spence also said that people who have work within the co-op movement probably do have a higher level of trust because of the community involvement and the difference they make in those communities, but that this does not necessarily extend to global level.

Professor Michael Spence is the 2011 Nobel Prize laureate in economics. He is currently Chairman of the Commission on Growth and Development, and Professor of Economics at NYU’s Stern School of Business.

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