Review: Scaling-Up the Cooperative Movement

Scaling-Up the Cooperative Movement: How to scale-up the cooperative movement without sacrificing cooperative autonomy edited by Thomas M. Hanna and Andrew McLeod

Published in late 2014 by Grassroots Economic Organising with The Democracy Collective. Available as a download here for a donation.

Scaling Up the Cooperative Movement is a rare and valuable find – it is relevant, honest, thought provoking and inspiring.

The 60-page book is a blast of fresh air compared with the anti-co-operative, boring drivel served up by the likes of Lord Myners in his review of the Co-operative Group, and former IMF manager, A. Michael Andrews, author of ICA publication, Survey of Co-operative Capital. Most of the authors of this book are grounded in the worker co-operative movement of the USA.

Co-editor Thomas Hanna sets out his position from the outset.

“Growing numbers of people in the United States have come to the realisation that the current economic and political system is profoundly dysfunctional,” he writes.

“But while public sentiment may be more amenable to contemplating fundamental political economic changes than in the recent past, the fact remains that the opportunity has yet to be fully seized.

“Specifically, the co-operative sector, which forms a basis for many visions of a more just, egalitarian, and sustainable society, remains quite small.”

The book looks at the bigger picture of strengths and limitations of democratic co-ops in capitalist economies. It seeks “to present a big-picture, systematic look at the present and future of the co-operative movement. The articles linked to below begin a conversation that, we hope, will help to better define some of the pressing questions and begin to offer ways to address them.”

Its authors write in detail about systemic change needed for co-ops to thrive.

Many of those who have taken study visits to Mondragon – including myself – have benefited from a tour of the Fagor factory.

In the chapter on Mondragón and the System Problem, Hanna and Gar Alperovitz discuss recent failure at Fagor Electrodomesticos, “the fifth-largest manufacturer of such products in Europe”.

“Mondragon will provide jobs and income security for a certain period for some of its workers in Spain. This is one of the co-operative network’s great advantages…

“The fate of the roughly 3,500 non-Spanish wage labourers (ie not co-operative members) in other countries, however, is unclear.”

They argue that the system question must be addressed in theory and in practice (such as the car industry and public transport) so that our hopes are not “thwarted by forces more powerful than any one element in a system can handle alone”.

A big thanks goes to Caitlin Quigley for naming an elephant in the room in her chapter on Creating a Cooperative Culture: Lessons from Mondragon. “Within Basque country, Mondragón is a radical social institution and outside of Basque country, Mondragón is a pretty typical multinational corporation,” she says.

Andrew McLeod writes two exceptional articles on co-operatives engaging with government. He articulates my experience that government intervention in
co-operatives and their markets usually does more harm than good. In the chapter Cooperative Movement Should Engage the Government Cautiously, he compares the examples of electricity co-ops and US health care.

“Obama’s healthcare reform threatens huge political costs that seem likely to make co-operatives less viable as an implement of public planning while causing substantial internal damage to the movement,” he writes. “The so-called ‘CO-OPS’ are not co-operatives, but rather ‘Consumer Operated and Oriented Plans’.

Worst of both worlds

“The ‘co-op plan’ seemed like a useful attempt to repeat a hugely successful government planning effort from the last century,” he adds.

“In the 1930s, investor-owned utilities were avoiding less-profitable rural areas, leaving them literally in the dark as city-dwellers enjoyed the benefits of light and power. The creation of hundreds of co-ops through the federal Rural Electrification Administration transformed the countryside and built a powerful and inspiring model that includes its own systems of development and finance.

“Unfortunately healthcare CO-OPs now seem to provide the worst of both worlds… And, although, they are associating the co-op brand with a massive and controversial reform that is under attack from the right and the left, they are not even co-operatives.”

In the chapter Planning Must Be Centered in the Cooperative Movement, Mr McLeod uses three further case studies – Mondragon’s own social security system, the Co-operative Group, and so-called co-operative schools.

“Mondragon’s internal social security system, Lagun-Aro EPSV – which has played a huge role in efforts to mitigate the economic devastation felt by the former employees of Fagor Electrodomesticos – was created after the Spanish government declared that Mondragon workers were not employees and therefore ineligible for public social security. Lagun-Aro’s success, although modest, comes because the co-ops were unwilling to let the national or Basque regional governments’ priorities take precedence.”

His perspective on the disaster at the Co-operative Bank and Group is similar to my own.

“The Co-operative Group lost control of its subsidiary bank after the collapse of an ambitious acquisition of 632 retail branches of Lloyds Banking Group. This was the direct result of government planning to address the systemic problem of banking industry concentration by forcing the breakup of Lloyds as a condition of its bailout.

“This attempted merger followed another – with a troubled mutual called Britannia – that was more organic in its origins but seems nonetheless to have involved some degree of regulatory breakdown related to political parties seeing co-ops as a useful tool to meet their ends. The government favoured a co-op solution to a dysfunctional banking system, which sounded like a good thing but ended disastrously with the bank snatched by US private equity vultures.”

The fallout from this has seen things get worse, adds Mr McLeod.

“And as the Co-operative Group struggles with the economic aftermath of this catastrophic adventure in economic planning, it has become a political football kicked between the government and opposition. Regulators are obviously facing questions, but scrutiny is also directed at a Co-operative Party that exists within Labour.”

Plan with caution

Not that this means planning with governments is inherently wrong or dangerous, he points out.“Such planning is widespread and probably inevitable,” he says.

“However, co-ops must approach any planning done with larger and more powerful partners cautiously. Planning may be a nice ideal, but successful planning depends upon a stable basis for such planning as well as trust of planning partners.

“Neither of these conditions exists when it comes to most government bodies, which are generally much larger and more powerful than co-operatives while also motivated by entirely different values than member benefit.”

Mr McLeod asks, “So what should we do?” and his answer is an Italian model under active discussion in the UK co-operative sector.

“There are opportunities to engage government without losing co-operative autonomy, illustrated by Italy’s Law 59/1992 requiring that co-ops contribute 3% of profits to co-op development funds run by co-op federations,” he says.

“This seems to me an acceptable risk because the funds are from co-ops and held by co-ops. The threat of co-option is also mitigated by the strength of the co-operative movement there, relative to the weakness of the state, which rarely goes more than a year or two without a new government.

“Until US co-ops have the organised critical mass to hold our own in political discussions, we would best steer clear of government-centred planning and focus our efforts on building organisational capacity and inter-sector coherence.”

The best part of the chapter on Confronting the “System Problem” Cooperatively, by Len Krimerman, is his example of arms manufacturer Lucas Aerospace in 1970s England.

Workers discovered the factory owners had decided to close it down. They came up with 150 socially useful products they could make, from hybrid road-rail vehicles and kidney dialysis machines, to heat pumps and a hob-cart for children with spina bifida.

One of the award-winning factory leaders, Mike Cooley, said: “It’s frequently asked of me, ‘Do you really think that ordinary people can deal with these problems’? I personally have never met an ordinary person in my life.

“All the people I meet are extraordinary. They’ve got all kinds of skills, abilities and talents and never are those talents used or developed or encouraged.

“What we’ve got to remember, as we’re driven down this linear road of technology, is that the future is not out there someplace as America was out there before Columbus went to discover it. The future hasn’t got predetermined shapes and forms. The future has yet to be built by people like you and me.

“It can be a future in which we are not threatened with mass annihilation through nuclear weapons or ravaged with hunger. It could really be a world in which we treasure all our people equally and get science and technology to serve people rather than the other way round.”

Hilary Abell’s chapter, Seizing the Moment: Catalyzing Big Growth for Worker Co-ops, summarises some of her clearly outstanding experience organising co-operatives with Women’s Action for Gain Economic Security (Wages), now Prospero.

“Wages’ oldest surviving cleaning co-op took ten years to reach $1m in annual sales, while the largest, founded five years later, hit the million-dollar milestone in half that time,” she writes.

“The similarities and differences between these sister co-ops are highly instructive. The profile of the worker-owners, their initial training, and the prospective client base of these co-ops positioned them for success in both cases.

“Worker-owners were passionately engaged in making their businesses succeed, and they did! Many of the women in both co-ops are now primary breadwinners for their families, working just one job instead of two, and nearly all have increased their skills, their time with family, and their general well-being.”

But Abell notes some crucial differences between the two. “The newer co-op,” she says, “grew faster and more sustainably, creating jobs with co-ownership and health benefits for more women, while the older one experienced more conflict and plateaued its growth within a few years.

“Three key factors facilitated the newer co-op’s success: 1) an experienced manager who provided day-to-day leadership and optimised operational efficiency to increase workers’ earnings; 2) outside board members who brought leadership, business, and organisational development expertise; and 3) sustained guidance and training from Wages for five years.”

As Abell says, the story of the two co-ops is richer and more complex than this, but the lesson is clear.

Tactical change

“The 35 worker-owners of Natural Home Cleaning, the fast-growing younger co-op, have increased their family incomes (the metric most indicative of family economic
status) by 70–80% on average, within one to two years of joining the co-operative. With better pay, robust profit sharing and health benefits, they have moved beyond the instability and indignities of low-wage work in the US.

“The question then becomes, what will it take for more co-operatives to create this kind of measurable impact in workers’ lives? I believe that this kind of tactical change – built business by business, job by job – is how worker co-operatives can drive the broader vision of a more just and sustainable world. Among other things, we must create a pipeline of skilled co-operative managers, board members and co-op developers from both within and outside the movement.”

In conclusion, Scaling Up the Cooperative Movement has further informed and inspired my experience and belief that democratic co-operative businesses are often a positive force for change.

We occasionally need helpful interventions from government. However, the tendency of governments to use co-ops to front unpopular policies – such as cuts to public services and bailing out capitalist banks – can be fatally catastrophic for co-ops and the co-operative identity.

Co-ops need to stick to our principles and focus first on meeting the needs of members. We need access to co-op-friendly advice, support and finance. Co-ops operate in mixed capitalist and state economic systems. We need to change those systems at the same time as building and defending our co-operative alternatives.