Can cooperatives humanize our economy?

Book Review of Humanizing the Economy: Cooperatives in the Age of Capital, by John Restakis, New Society Publishers, 2010.

The economy is about business, right? Sure, we have a dynamic mixed economy, and most people support decent social programs and government intervention to protect the environment or to improve living conditions for the poorest. In fact, the countries who have the biggest public sectors not only do better on social outcomes but also tend to be the most competitive, when ranked by organizations like the World Economic Forum.

Still, the commonly-accepted framework is that any positive things from government can only happen on the back of a successful market (that is, capitalist) economy. So we are often chastened by stern voices representing business that we ought to be careful not to “kill the goose that lays the golden eggs.” As much as we seek to make the world a better place, we have to accept runaway CEO salaries, fossil fuel addiction, financialization and tax cuts as preconditions for doing good.

One way out of this is to change the game by not ceding business as purely the sphere of capitalist enterprise. John Restakis reminds us in his book, Humanizing the Economy: Cooperatives in the Age of Capital, that when it comes to business, capitalism isn’t the only game in town. Indeed, at a time when inequality has reached alarming proportions (and the looming policy agenda promises to make them even worse) and climate change points to wrenching challenges for human civilization, we need a big break from business-as-usual.

“Cooperatives,” says Restakis, “are enduring evidence of another way of living our lives.” His thesis is that cooperatives show us an alternative model of economic and social exchange based on cooperation and reciprocity. It is a very different path from the standard polarity between business and government, “a middle path that avoids the extremes of market rejection on the one hand (as in the case of Marxism) and the unbridled power of capital as expressed in neoliberalism on the other.”

Humanizing the Economy is a profoundly readable and accessible book in spite of its sweeping scope. Cooperatives read like a forgotten chapter in our economic history. I found the early part of the book, in which Restakis reviews the intellectual and practical history of cooperatives as a reaction to the excesses of early capitalism, particularly fascinating.

In the 20th century, trade unions and public ownership have gotten more attention in Canadian political economy, and their impact is still manifest today as a means by which inequality is reduced and other broader social objectives achieved. That these acts reduce the massive slice of the pie going to the very top earners and owners explains why they have been under attack federally and provincially (and worse, south of the border). The other grand narrative of the 20th century — revolution — used to be galvanizing to working classes and compelling to idealists, but seems officially dead in the wake of failures of Soviet Russia.

Restakis points out the quiet and incremental revolution represented by the cooperative movement, which has emerged as a counter-force to capitalism in its own right, claiming 800 million members across 85 countries. By documenting the steps from early history of coops to modern examples in different industries and different parts of the world, Humanizing the Economy provides a long list of “yes, we can” case studies of the cooperative form, showing its versatility across different contexts. If we were to include the not-for-profit sector this scope of non-capitalist enterprise is greater still.

The promise of cooperative institutions reaches beyond profits for a shrewd and small minority of investors to democratizing the production system, and in doing so rebuilding the very social capital that capitalism erodes. Agriculture was central to early cooperatives. There is a long history of farmers’ coops, supply management practices and marketing boards in Canada, and not only that they have been very successful in response to a ruthless free market more inclined to leave farmers bankrupt.

But coops can exist in pretty much any sector, from housing to car-sharing to outdoor equipment (MEC) to financial services (credit unions). They are just another way of organizing in order to produce things of value. Coops are of the marketplace, but transcend the atomized producer-consumer model we see in economics textbooks by creating new nodes of market power based on the mutual interests of many members. The book covers a diverse range of examples, from major industry to social care services to consumers to sex trade workers to fishers, each with the common element of people joining together to find economic strength in numbers.

Perhaps one area that needed more attention in the book is around finance and banking. Cooperative credit is peppered throughout the book in the context of the various coops in different locales, but hammering the point home with a review of credit unions would have been nice. Take Vancity credit union as an example (one conspicuous by its absence since Restakis hails from Vancouver). Serendipitously, I just opened up my member package that gives me a vote in the upcoming board elections. In the package the latest financials show that Vancity has $14.5 billion of assets, more than $12 billion of which are loans, mostly mortgages. The credit union charges competitive interest rates, and the profits go back to members (the total membership equity in the credit union is $770 million), not distant shareholders only concerned about stock value. If Vancity disappeared, the flow of funds to Bay Street would be noticeable.

So now is a great time for the entrepreneurial, socially-minded and environmentally-conscious folks to develop networks to reclaim economic space from global megacorps and put it back in the realm of local people. With any luck, they’ll be popping up like mushrooms. Coops thus offer us a new chance to reinvent citizenship as mutual co-owners of enterprises that meet our collective needs, “firing the boss” as Naomi Klein and Avi Lewis put it in their movie, The Take.

But how this will all come about is a question I’m left struggling with. It requires precisely the entrepreneurial spirit of small business, but harnessed in a different direction. In addition, there are many coops that struggle to make things work. We are part of a consumer coop, Neighbours Organic Weekly, that connects to local farmers but through bulk purchasing supplies lower cost organics. The coop is viable, but has not experienced surging growth in membership. How can such cooperative models be scaled up?

The most successful cooperative economy model in advanced economies is Emilia-Romagna in northern Italy. Restakis’s review of the region’s history is lively and fascinating, but also raises some key challenges for coops. First, there is historical inertia as a barrier to change. How easily replicable is a regional economy like Emilia-Romagna to a province like BC? Coops arose in Italy out of a distinct time and circumstance that cannot be easily replicated in other jurisdictions (just as public auto insurance, ferries and electricity did in BC). Secondly, does scaling up change the nature of the exercise. One challenging example Restakis gives is SACMI from Imola, Italy. It is a dominant player among regional coops, and with “control of 60 capitalist firms, 37 of them abroad, and sales in 100 countries.” This fusion of coop and capitalist is not what we might normally think of. This coop provides employment for 5,000 workers, but has only 390 coop members. It reads almost like a law firm, where some workers eventually can make it to become partners.

Just keeping the idea of coops alive is an important contribution of Restakis’s book, so that when the circumstances present themselves people can self-organize. It would be fascinating to think about what a legislative agenda supportive of coops could look like, especially in areas like food and energy, where we are likely to want greater insulation from climate impacts. Restakis’s thoughts on how that could happen, given the urgency of change we need in our economy, would be welcome.

Humanizing the Economy plants some seeds of radical change. If nurtured by enough of us, a cooperative economy could be a new model for how we do business in the 21st century, although non-profits and public enterprises would be part of the world I envision. Small and large businesses will inevitably have a role to play, too, but to the extent that a cooperative model can democratize key parts of the economic system, and remove the absentee shareholders of megacorporations from the picture, it could drive a huge improvement in developing an economic system more aligned with good social and environmental values. Restakis tells us it is possible, and though we still need a strategy and a roadmap, he should be thanked for lifting the veil of narrow economic debates and showing us that “business community” need not be an oxymoron.


  • Nice article.
    One thing I think is that education and awareness are important. One of the major things that makes the real world different from dominant market-oriented theories is that people don’t know everything (although neither must they know practically nothing, as Hayek might have it). Hilary Wainwright (in “Arguments for a New Left”) puts forward an idea of knowledge as something that is built up socially, and I find it persuasive.

    So when it comes to business activity, people start more or less capitalist businesses partly because that’s what they know how to start, it’s what they are aware of, it’s what they’ve taken a community night school course in or whatever. Whenever you learn about small business accounting, whenever you learn about how to make a business plan and try to get a loan from a bank, it’s always in the context of you individually starting a business and maybe employing people. So even though the skills may be pretty much the same as for getting a co-op going, that’s not how people are going to think.

    If there were also a lot of courses and training and buzz about co-ops and how to start them, things would be quite a bit different. People would start co-ops because it was a normal, practical thing to do, where now to the extent that people start co-ops it’s usually due either to political vision or to deep frustration with existing approaches.

  • One caveat concerning credit unions. Desjardins, a credit union here in Québec has been shaken lately by a debate on the non-cooperative values that has taken hold of its management as it has grown into the largest financial institution here in terms of personal banking services. Its closing down branches and service centres, concentrating and enlarging individual unions, taxing its depositors with high user fees, overextending consumer and mortgage credit to overindebted households, ect.
    I’m actually waiting for a student willing to do a PhD thesis on the institutions drift and role in pushing for financial deregulation. So a coop is as good as the cooperative spirit of its members and staff and democratic life of its organization. Desjardins is a complex structure that we can think of as two silos, the federated coop, called the “movement” and the for profit holding Desjardins inc, called Desjardins financial services. In theory the movement uses and controls the holding, in practice over the years the whole structure has been “captured” by the bay street minded staff that control the holding. Its a depressing and fascinating story that still needs to be told.

  • Interesting to come across this review just now. I am currently reading Gregory K Dow’s book ‘Governing The Firm: Workers’ Control in Theory and Practice”.

    Co-ops don’t just read like a forgotten chapter in economic history, they are a forgotten chapter. Panu Kalmi has a paper on “The disappearance of co-operatives from economics textbooks” that is worth reading.

    I wonder if one of the key characteristics of co-ops could be a problem: their voluntary nature. I see two possible difficulties.

    One is that an established co-op could exclude new members, leaving new workers as employees. The second possible difficulty reflects my own particular interest: will they lead to significantly reduced economic inequality? I suspect that part of the voluntary nature of co-ops in the current environments they work in — legislative, social, economic — is that they attract the more egalitarian minded, and income distribution in them is much more compressed than in the large capitalist firms. However, I don’t know if we have any reason to believe that if the legislative environment changed to make co-operatives, rather than shareholder firms, easier, then we would see the current relative egalitarian approach continue. Or, to put it a different way, if we changed the rules to make co-operatives the standard way of doing business, would the kind of greedy sods who nowadays go work for salaries at a NYSE, FTSE or Fortune 500 corporation bring their greed to the Mondragons and Emilia-Romagnas?

  • @ Eric,

    That is funny I qualified everywhere except at desjardins for mortgage. Now it feels personal.

    More seriously I am not sure coops would change much unless they were worker owned and internally financed. And even then the problem of competition, domestic and international, would put strains on the level of industrial democracy tolerable.

  • @ Travis, your too financially literate that’s why !
    Seriously they are the inventors of the RRSP loan. Can’t contribute to your RRSP, we’ll loan you an mount, and in theory you should use the return to repay the loan. Oops a daizy, you paid yourself a new barbecue and deck instead, that’s OK, it’ll be principal + 11% interest over a 3 year period as stated in the fine print of the contract, btw
    hope to see you next march 1st !

  • Denise Freedman

    I’m wondering if Purple Library Guy, with his more sociological reasoning, isn’t closer to what I would argue as the reason for the disappearance of co-ops, and for that matter, public enterprises, than Tomboktu, with an explicit rules-based reasoning.

    Maybe it has more to do with a political economic reasoning than an economic one.

    Emilia-Romagna evolved out of a particular historical political economy, as do the Scandinavian countries, as does the United States. As we do in the rather libertarian shadow of the United States.

    People cannot do what they don’t know how to do or, more specifically, what they don’t even know exists.

    While it is true I have watched successive federal governments abolish crown corporations (which may not have been ideal public enterprises), this has reflected a shift in values/norms as much or more, I would argue, than rules.

    Once upon a time, there was something called the Laffer Curve, which predicted that cutting taxes (which by definition is always on those who make the most in society) would generate more government revenue. Something about a rising tide. . .

    Which came first, the rules change or the values/norms change?

    I suppose, as a student of structural social work and sociology, it is my limitation to see an interaction between what people know and what people do, with causality, if there actually is such a thing, going in both directions.

    The most successful “rules” are those that don’t even seem to be rules, that are just part of the fabric of reality.

  • Quebec solidaire probably has the strongest platform with respect to cooperatives. For example, they support:
    – Taxing businesses more (less) if they are less (more) democratic in their operations. So worker cooperatives would face low tax rates while large hierarchical companies would face high tax rates.
    – Changing rules so the pension fund has a preference towards cooperatives or unionized businesses.
    – Creating rules and funds that support labour buyouts of firms, especially in situations like closure, outsourcing or sale of the firm.
    – Large expansion of the social economy and related community economic development funds.

    The NDP doesn’t promise any specific new cooperative funding, other than their housing and child care amounts.

  • Bob Fitch (RIP) on the political preconditions for Emilia-Romagna’s cooperative success, i.e. “solidarity and mass political organization” via strong local unions and the Communist Party, whose highly competent administration ruled the area for over 50 years:

    “The [WWII] resistance in Emilia-Romagna drew in nearly everyone: the farm laborers and the professionals, the workers and the artisan owners of the region’s myriad small factories. It was the only region in Italy where workers actually seized the big factories from their owners.”

    “Since the anti-Fascist resistance came down from the hills and took power fifty years ago, Bologna and the surrounding Emilia-Romagna region have been transformed into a working left-wing model of a future Italy, … Here is a place where the left came to power and didn’t make a mess.”

    “The government provides what Bolognese economist Sebastiano Brusco calls “real services” — not just those that make up for market failures, like unemployment compensation and welfare, but services that enable people to work. Emilia-Romagna’s female participation in the labor force is the highest in Italy. In part this is because there is a century-old Emilian tradition of women working outside the home, but it is also the result of a strong, independent female workers’ movement for adequate daycare. (Today in Modena, about two-thirds of children are in nursery school, as opposed to 4 percent in Naples.)”

    “The beneficiaries of “real services” are people working in small and medium enterprises. … No invisible hand provides Emilian firms with financing, daycare, urban planning, technical assistance, research institutes and specialized laboratories. Small companies can’t be expected to devote much capital to research and development. They can’t even afford to hire marketing consultants. The regional government arranges for these services — chiefly by contracting with nonprofit economic research agencies like the internationally respected NOMISMA.”

    “… But why don’t Emilian firms simply leave to avoid the region’s high wages? One reason is that a significant minority are producer co-ops; the point of self-management is to stick around to insure that you receive the value you produce. But more important, Emilia-Romagna has created a whole economy that, while not formally cooperative, is based on small and medium-sized enterprises that do depend on one another. Small businesses are constituent parts of an economic organism that’s developed over the past fifty years with government infrastructural assistance: financing, low rents and real services. If a small firm were to move outside the region, it would be like a hand suddenly detached from its body.”

    Praise the hand all you want, but don’t forget the political action that created the body it is attached to.

Leave a Reply

Your email address will not be published. Required fields are marked *