Background on Cooperatives

Cooperation as a means of satisfying the needs of people has been around forever. Human beings are innately just as cooperative as they are competitive, if not more so. Scientific research has proven that we are hard-wired to strongly prefer fairness. Cooperation, in our modern understanding, is an institutional form of the human tendency toward mutual help, self-determination, fairness, and inclusion. It has looked many different ways in different countries, regions, and historical periods, and has often been a tool of oppressed peoples to improve their living situation in defiance of broader societal and institutional barriers.

A good maxim to keep in mind when thinking about the difference between co-ops and individual businesses is: “If you want to go fast, go alone. If you want to go far, go together.” Cooperatives do take some work and patience. But they exist to help individuals, or individual businesses, do more than they could on their own.

Cooperative Identity

The International Cooperative Alliance has expressed a definition of cooperatives as an “autonomous association of persons united voluntarily to meet their common economic, social and cultural needs and aspirations through a jointly owned and democratically-controlled enterprise.” This phrase succinctly captures several key features of cooperatives that are more fully described in the “7 Co-op Principles”. The principles describe both what makes a co-op different from other organizations and what makes cooperatives more successful than they would otherwise be if they did not strive to live up to those principles.

As a shorthand, though, it’s a co-op if:

It has members, which it serves in some way;
the members own the enterprise; and
the members democratically control the enterprise.

“Democratic control” could be minimal, such as electing the board of directors or approving the annual budget. It could also be much more participatory. It depends on the co-op. But in any co-op, each member has one vote. And investors who are not members generally do not get a vote, or at least cannot control the co-op.

The members who are served can be:

Consumers of a good or service, such as housing, banking, food, childcare, outdoor equipment, shared vehicles, gym access, foreign films, you name it.
Workers who benefit from having the co-op provide them with employment, and can work in any industry.
Businesses or other organizations, small or large, that can collectively access inputs, processing, marketing, business services, etc. Some of the best-known brand names are cooperatives of independent businesses, such as True Value hardware or Best Western hotels. Food brands such as Land O’Lakes and Organic Valley are also cooperatives owned by farmers. In many franchise operations, such as McDonald’s and Taco Bell, the independent operators belong to a cooperative to buy inputs or pay for ads. Municipalities and libraries can form cooperatives. Independent artisans can have a shared gallery. Solar installers can band together to form a co-op to access lower-cost solar panels.
Some combination of the above, often known as hybrid or multi-stakeholder cooperatives. This could be for example a grocery with both consumer and worker members, or an agricultural co-op that includes producer and worker members. While the co-op serves each type of member, it often is also serving a larger, shared purpose.

Below is a selection of different ways that co-ops can serve their members.

Cooperation Among Small Entrepreneurs

Small, independent entrepreneurs can gain a lot from cooperating. (See “5 Ways You Can Maximize Your Business Through Collaboration”.) In Pittsburgh, the Ujamaa Collective provides joint marketing and other benefits to its members. This organization also shows that a cooperative can form as any kind of legal entity, including a 501(c)3 nonprofit.

Shared space is often a need of entrepreneurs. The U Street Music Hall was a DJ-owned and operated dance venue (which closed due to the Covid-19 pandemic).

Arts

Artists and artisans turn to cooperatives for many needs. It might be housing, as in the Brew House in Pittsburgh, or studio space, as in Talking Dolls in Detroit. It might be lower cost materials in bulk, or access to equipment, as in the Icehouse Pottery Studio. It could even be a platform co-op, such as Resonate, an artist, listener, and worker-owned streaming service. A report on the links between arts and solidarity economics is at art.coop.

Childcare

Childcare co-ops could look like informal babysitting that’s shared among parents, worker-owned childcare centers like Philadelphia’s ChildSpace, or anything in between. The ICA Group incubated the CoRise Cooperative, a purchasing co-op for family childcare providers. Family childcare providers can team up to collectively use a space, purchase supplies, and fill in for each other on sick days, while each still running their own business.

Tech

Any cooperative can use technology in innovative ways to serve its members. That said, there is a particular need for technology to be developed in ways that serve communities and workers better. A grouping of organizations that focus on the role of technology in cooperation can be found at platform.coop. The main idea is that rather than aim for the typical route of acquiring venture capital and getting bought out by a big firm or doing an IPO to the market, tech firms can aim to serve their stakeholders well and “exit to community” (with either worker or consumer ownership or both). See https://e2c.how/ and the Exit to Community Primer.

Or tech companies can start out as cooperatives, particularly worker-owned co-ops (see for example the US Worker Co-op directory, filtered for tech industry, or patio.coop, a global network of tech worker co-ops). Many tech workers find that they are better able to fulfill their needs for meaningful work and good working conditions at a worker co-op. The tech worker co-op peer network “aims to create an alternative in the industry by centering women, people of color, and other underrepresented groups as well as by breaking down systems of oppression and advancing uses of technology for justice and liberation.”

Health

There are many fewer health co-ops than there ought to be! Joining together to meet healthcare needs affordably was the original point of mutual insurance companies, but the industry has since largely moved toward less care, higher costs, and lower payments to practitioners, with predictable effects on health outcomes. The National Cooperative Business Association has a short webpage on health co-ops. It features Health Partners, which was founded as a cooperative in 1957.

One barrier to success in the health industry is that risk is best pooled over a very large population. We are all going to need healthcare one day, but we each might not need it for several years. That said, the largest worker co-op in the U.S. is a homecare provider, Cooperative Homecare Associates. If industry barriers can be overcome (similarly to the situation in childcare), then a cooperative structure can help support worker and beneficiary wellbeing.

Real Estate

Access to a place to live, work, and pursue meaning in life is essential to every person’s wellbeing. Unfortunately, as George “Mac” McCarthy, president of the Lincoln Land Institute emphasizes, real estate serves both the occupants and the investor, and in a bidding war, investors nearly always win. Affordability must be carefully created and preserved, and cooperatives and land trusts are a good way to preserve affordability. Cooperatives that do not limit equity, however, can be just as unaffordable as any other housing. Limited-equity or group equity cooperatives preserve affordability but have a smaller effect on household wealth building. An example of a limited-equity co-op would be the Solar System Co-op in Pittsburgh.

Another pathway is exemplified by the Northwest Pennsylvania Investment Cooperative, which allows local people to put their money together to purchase both commercial and residential properties and offer them to the community at reasonable rates, while making modest investment returns. An organization such as the East Bay Permanent Real Estate Cooperative frames its mission as taking properties out of the speculative market to create permanently affordable housing and commercial spaces, and includes resident members, investor members, community members, and staff members.

Commercial

For small businesses, rent can be the difference between profitability and bankruptcy. When commercial rents rise out of control, small businesses suffer. Becoming owners, or renting from a community trust or locally-focused investors, can provide a stable place to do business.

Housing

Resident ownership is a transformative tool to stabilize a building or neighborhood. Democratically elected boards often oversee professional property management. Supportive technical assistance can help volunteer boards remain well versed in the legal, financial, regulatory and other systems that they need to navigate to keep their homes safe and secure. Residents often can use their ability to work together to create other benefits and amenities, such as community gardens, disaster preparedness plans, mobile clinic visits, and more. Participation in residential co-op governance also is a great way for people to learn about running a business and civic participation or to gain marketable job skills.

Employee Ownership

There are many forms of employee ownership, from stock options to ESOPs (employee stock ownership plans) to trusts to cooperatives. The benefit of employee ownership comes from alignment between the interests of workers and the company as a whole. If employees understand that when the company does well, they do well, and they understand the role they play in improving the performance of the company, and management is conducive to employee participation, then you often see a marked difference. Employee ownership can raise wages and benefits, reduce turnover, increase productivity, shrink the wealth gap for women and minorities, and stabilize company longevity.

Employees may also be the best buyers of a business that an owner wants to sell. They won’t strip it like a competitor would, and will clearly want to preserve their own jobs. The Workers to Owners network that KDC belongs to works on promoting the option of selling businesses to employees. In Pittsburgh, the Task Force on Employee Ownership promotes worker-owned businesses and transitions.

Appendix

Resources and background research

This quick piece on The Case for Cooperatives: 10 Reasons Why Economic Development Agencies (EDAs) Should Support Co-ops does a good job of indicating many of the advantages and benefits of cooperatives, with links to sources.

Collective Courage by Jessica Gordon-Nembhard is a history of cooperation among African Americans from the earliest days of slavery to the present.

The Philadelphia Area Cooperative Alliance (PACA) has some great resources about co-ops, including a recorded Prezi slideshow you can follow at your own pace, on their website: https://philadelphia.coop/about-cooperatives/.