Ownership Matters|Issue 22
Why So Few Co‑ops?; Workplace Democracy; Arizmendi Assn.’s Big Vision
- Editorial: The Russian Road Not Taken
- Interview: The Arizmendi Association’s Tim Huet — Part 2
- What’s the Problem with Co-ops?
- Books: David Ellerman’s Neo-Abolitionism
- Worker Cooperatives Survey
- View / Listen to Our Feb. 24 Reader Gathering
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share this segment by right‑clicking icon to copy linkThe Russian Road Not Taken
Quite a few years ago, I signed up for a summer-long camping and driving trip through the U.S.S.R. (I’ve written about its splendors and miseries elsewhere.) We spent several days in Kiev, a beautiful and ancient city.
The experience left me with two strong emotions, as it did for most people: a deep distrust of the Soviet system, along with a warm affection for ordinary Russian people, many of whom to us visiting Americans were much more than “ordinary.”
I became an amateur of Russian history and the terrible tragedy of their “road not taken” back in 1991, when the gang around Boris Yeltsin embraced the shock therapy prescriptions of their American advisors and plunged the country into the catastrophic economic freefall of the 1990s. That societal collapse laid the groundwork for the arrival in 2000 of Vladimir Putin, hailed as the man who put back in place at least some of the social safety net for a country which had lost 50% of its GDP.
As an example of the road not taken — which is the one Yeltsin’s predecessor Mikahil Gorbachev had in mind — note the New York Times article of March 26, 1988: “Going Co-op: At the Soviet Economic Frontier.”
Many people don’t remember that Gorbachev — Gorby, as he was called — not only was a committed reformer but gave up power willingly and was averse to the use of force, even leaning toward principled non-violence according to some accounts. (He notably did not respond to the fall of the Berlin Wall in 1989, perhaps with hopes of influencing the reunification of Germany still to come.)
Gorbachev — in the short window of time escalating events allowed him during those months — proposed the country move toward a social democracy, and by 1990 his reforms had enabled the creation of some 200,000 legitimate worker co-ops, employing almost 5 million and accounting for 5–6% of GDP.
Unfortunately, the wave of growing privatization turned into asset-stripping in the Soviet republics as Gorbachev’s attempts at restructuring were used by local elites as license for “spontaneous” seizing of public assets and “grab-it-tization.” In other words, his economic reforms disastrously outran his political reforms.
Instead of making a transition to something like the social democracy Gorbachev envisioned (a larger Sweden perhaps), Gorbachev’s often-inebriated successor Yeltsin allowed an extreme descent into oligarchic capitalism. At the time, we should recall, Yeltsin was viewed as the guy who wanted real “democracy,” whereas Gorbachev was scorned as a half-hearted reformer who tried to “save communism.” (By 1998, roughly half the Russian people wanted to put Yeltsin on trial for his actions.)
History abounds with these stories of what might have been, of course. Solidarity with the Ukrainian people — and the Russian people as well.
share this segment by right‑clicking icon to copy linkBuilding Beyond the Cooperative Business
A Conversation with Arizmendi Association of Cooperatives Co-founder Tim Huet (Part Two)
I think you mentioned earlier affordable housing and the idea of a land trust for the Arizmendi Association. Have you gone forward with either or both of those projects?
We’re collaborating with a construction co-op called Co-Everything, based out of Boston. And they’re out here in Oakland right now building the first prototype of the housing that we’ve been collaborating on.
Prospective homeowners in the Bay Area trying to buy a property find it’s just a no-win. At the last minute, some computer programmer shows up with a briefcase full of cash and gets the house. For us, that’s not really a way to create new housing or long term housing stability.
So what we’re trying to do is look at pieces of property that aren’t being fully utilized — maybe city property — and build new property there.
But our primary model is to go to homeowners and say, you have 600 square feet in the backyard you’re not using. We’ll develop property on it, accessory dwelling units, with the funding. And our construction co-op will build it — we’ll get the permits and everything else. Then we’ll rent it out, giving you a share of the rent, to someone who otherwise couldn’t afford to live in the Bay Area. So that’s the model. And we’re hoping that if the prototype succeeds, then we’ll be able to accelerate the project.
And will that project operate as a land trust?
No, it’s definitely going to be primarily a worker cooperative, and if the tenants or the homeowners want to become members of the coop, they can buy in.
I happen to live in a housing cooperative, I’ve lived in land trust housing cooperatives for the majority of my adult life. And I definitely believe in them.
But what I also find is that as the residents, you really don’t have any incentive to help people create more housing. Maybe have the skills or the interest to risk your existing housing to create more housing. What we’ve always done with the worker co-ops is to use whatever assets we’ve created to create more assets, to build more cooperatives.
We want to create the same incentives for a housing cooperative system, where it’s really building housing which will go to people who have incentive to create more housing.
Very interesting. And you have your design and build firm that you could bring in on the project, right?
Yes. We asked our members back in 2018 to create a vision for the association. In earlier years when we had asked this question, the members said create more food co-ops, that’s what we know how to do.
But in 2018, they said, no, we need to create a more stable economic environment and in the Bay Area housing is one of those things that we need to be working on. So let’s go in the direction of a construction co-op and a landscaping co-op.
We wanted to think about how to bring our whole system to another region that might want us to help develop their system. So instead of us renting a bakery and driving up the cost of the building and the cost of the housing nearby, we would go in and buy the housing or put it into trust. We would have our own construction co-op buy the property and build the bakery. That’s part of how we want to create a comprehensive system when we go to some other region.
share this segment by right‑clicking icon to copy linkWhat’s the Problem with Co-ops?
Júlia Martins Rodrigues
When I first encountered the solidarity economy, I was thrilled with the potential of bringing together our core values with the current production system. Democracy, solidarity and cooperation can be powerful economic drivers beyond typical financial greed.
Then I discovered a mismatch between the mounting benefits listed by the co-op literature and what law professor Peter Molk described as the “puzzling lack of cooperatives.” I wondered why there are relatively few cooperative businesses operating in the U.S. market today compared to conventional for-profit businesses. Why do co-op revenues only add up to a small percentage of the global GDP and the world’s total employment? Is there anything inherently wrong with cooperative ventures?
Despite the long history of cooperative enterprises, their significant economic impact, and the substantial data available about these institutions, their vast potential has not been fully explored.
On the one hand, cooperativism gradually became a substantial force in some sectors, notably the agriculture and food industries, wholesale and retail sales, insurance, banking, and financial services, health, education, and social care in countries such as the USA, France, Germany, Japan, Netherlands, and Italy.
On the other hand, the presence of cooperatives is still very modest when compared to large corporate conglomerates. The choices for cooperatives are meager in most endeavors and there is a profound lack of understanding about what this option truly represents among entrepreneurs, investors, consumers, and policymakers. How can the crawling pace of cooperative initiatives be explained in the larger picture?
share this segment by right‑clicking icon to copy linkAre We Renting Ourselves?
Neo-Abolitionism: Abolishing Human Rentals in Favor of Workplace Democracy (2021) by David Ellerman
The most problematic institution in the economic system throughout most of the world is not the market or private property but the employer-employee relationship.
Thus begins the new book by David Ellerman, an independent scholar whose career has combined academic teaching (he has degrees in philosophy, math and economics) with writing speeches at the World Bank for Nobel Prize-winner Joseph Stiglitz. The collection of ideas in his new book are not easy to summarize but they are provocative — in the best sense.
Ellerman’s critique of our economic order — especially the exploitation of labor — is grounded in a vision of workplace democracy rather than conventional political labels. One of his goals here is to demolish the benign view of the workplace found in modern business culture, as a kind of neutral space where employers and employees freely bargain with each other and undertake production according to employment contracts. According to this view, between the power of the free market and free institutions like collective bargaining, somehow the right price for our labor will emerge.
As the quote above suggests, the author is not a skeptic about markets or about private property. Where he is almost startling is in his idea — captured in his evocation of the abolition of human slavery — that there is a connection between the brutal 19th-century institution and our modern workplace in which people can be rented by other people. He terms it “human rentiership.” (His long-time friend Noam Chomsky also speaks of “renting yourself” in the gig economy, a concept he acknowledges he picked up from Ellerman years ago.)
Ellerman does not believe that however consensual we may be in taking an exploitative job — if you look closely at the legal and philosophical history of our system — the contract is in important ways similar to those utilized under chattel slavery. To make this point, the author reviews the history of ideas around contract, property, and governance to demonstrate their relevance to his argument for abolishing the current labor system.
He further argues that our system for the voluntary renting of human beings has allowed the complete corruption and debasement of the original idea of the corporation. But blaming corporations (i.e., the legal form) for the ills of the current system of renting human beings is “like blaming glass bottles for alcoholism.”
“The important idea,” he explains, “is to preserve the original and ancient idea of a corporation as a group of natural persons engaged in certain joint activities.” The concept of the corporation began with groups of men related to each other by the place in which they lived and the things they did — whether in forming a monastery, a town, a guild, or a university, with the main point being the grouping of people, not the aggregation of assets.
A fan of Mondragon, Ellerman concludes: “. . . Hence the neo-abolitionist call for the abolition of that human rental institution in favor of all corporations being democratic associations of the people carrying out the activities of the corporations.” He does not provide a road map to this end but he is surely pointing us toward the right road.
share this segment by right‑clicking icon to copy linkLatest Worker Co-op Survey Shows More Co-ops But Fewer Workers
Karen Kahn is a communications consultant and the editor of Employee Ownership News.
The number of worker cooperatives in the United States grew more than 30 percent since 2019, an astonishing figure when you consider the obstacles to new businesses during the pandemic. Through its bi-annual economic census completed in 2021, the Democracy at Work Institute (DAWI) verified 612 worker cooperatives employing 4,732 workers.
In 2019, DAWI identified 465 worker co-ops employing 6,454 workers. The worker co-ops verified in the census must have at least three workers and 50 percent ownership of the business. DAWI estimates that there are closer to 1,000 worker co-ops operating in the U.S., with 10,000 workers.
The 2021 State of the Sector report, published in collaboration with the U.S. Federation of Worker Cooperatives, offers a number of insights into the demographics of workers, size of worker co-ops, median revenues, and regional growth patterns. Much of this data was gathered through a survey of 180 worker cooperatives and democratic workplaces.
Growing Number of Start-Ups
The report notes that the increase in the number of co-ops and the decrease in the number of workers reflects a growing number of start-up businesses. Among the surveyed cooperatives, 88 percent were start-ups, with 18 percent of those start-ups assisted by a co-op developer. The remaining 12 percent represented transitions of conventional businesses to worker cooperatives. The median age of these businesses was five years, with the majority established in the last ten years. Median revenue is around $300,000.
Predominantly Female Workforce
Cooperatives continue to attract women and people of color as places of employment. Among the surveyed co-ops, 52 percent of the workforce was female, 44 percent male, and 4 percent nonbinary. About 53 percent of workers identified as white, and 47 percent as people of color. One of the attractions of cooperative workplaces is fair pay. Unlike conventional businesses, where CEOs earn on average 350 times more than the typical worker, in worker co-ops the pay ratio is typically not greater than 2-to-1 from the top earner to the lowest earner.
Worker cooperatives tend to grow in regions where they are supported. New York City’s investment in worker cooperatives has grown the number of worker co-ops in the city to 91; overall, the state now has the highest number of worker co-ops in the country, 110. The Bay Area is also friendly to worker cooperatives, with 60 of California’s 99 cooperatives.
Other regions are also seeing growth in the number of worker cooperatives. Puerto Rico has 57 and Massachusetts has 53, clustered in the Boston area (25), Springfield (17) and Worcester (10). Several cities are newly identified as having five or more worker cooperatives, including Atlanta, GA; Cincinnati, OH; Jackson, MS; Providence, RI; and Burlington, VT. Though not broken down by region, the survey also identifies 64 worker cooperatives in rural areas, outside metropolitan districts.
Impact of COVID-19
The 2021 survey provided an opportunity to look at the impact of the COVID pandemic on worker cooperatives. About 80 percent of the surveyed businesses remained open through most of the pandemic despite a median drop in revenue of 44 percent. One in five worker co-ops lost more than 50 percent of their revenues as compared to nearly 1 in 3 conventional businesses.
To remain open, businesses had to pivot and find new ways to deliver their goods and services. Among the adaptations reported: moving to virtual/remote operations; moving services outdoors; implementing safety measures; shifting to provide essential services; closing brick and mortar locations; and increasing production. Nearly three-quarters of worker co-ops participated in some form of mutual aid, helping their communities through offering discounts and providing resources for their communities or other co-ops.
About half of worker co-ops consciously avoided laying off staff by reducing hours or using furloughs. Despite serious revenue losses, median hours worked fell on average only 9 percent.
share this segment by right‑clicking icon to copy linkFebruary Reader Gathering with Daniel Fireside Is Up for Viewing
You’re Invited to Listen — and to Take Part in Growing the Conversation
Our first Reader Gathering, Feb. 24, was a conversation with Dan Fireside about funding social movements and solidarity businesses. A recording is available to view now on Ownership Matters’ YouTube channel. This was a lively conversation, well worth checking out if you weren’t able to attend — and well worth sharing.
Note that subscribers who’ve also joined our Editor / Reader Circle on the website have had prior access to this recording in the last week and a half. The Editor / Reader Circle isn’t just a place to view video, though — it’s space for picking up with discussion post-event, and for exploring further. It’s also where we want to talk about your ideas for (among other things) future Reader Gatherings.
If you’re a newsletter subscriber, you’ll have received an invitation to participate in the Editor / Reader Circle. In the event you missed (or misplaced) it, just drop us a line at email@example.com.
We’ll announce our March Reader Gathering in a few days. If you’re reading this as a subscriber, you can look for an invitation in your inbox later this week.
If you’re not yet a subscriber, signing up is a simple matter!
Coming in Issue 23, March 22
- Interview: Matt Cropp of the Vermont Employee Ownership Center
- Books: Michael Menser’s We Decide!
Article ideas? Submissions? Helpful suggestions?
Contact the editor: firstname.lastname@example.org.
- Elias Crim, Editor
founder, Solidarity Hall; former business journalist and publishing consultant
- Júlia Martins Rodrigues, Managing Editor
attorney (Brazil); visiting scholar, law, University of Colorado Boulder; PhD candidate, civil and constitutional law, University of Camerino
- Daniel Fireside, Contributing Editor
founder, Uncommon Capital Solutions; board member, Namaste Solar; capital coordinator, Downtown Crenshaw Rising
- Zoe Crim, Editorial Assistant
B.A., linguistics, Indiana University Bloomington; co-founder Fair Trade group
- Paul Bowman, Design / Content Mgr.
- Felipe Witchger, Publisher
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