The Co-Op Movement – Democratizing the Ownership of Wealth One Step at a Time

by on October 16, 2014 · 7 comments

in American Empire, Civil Rights, Culture, Economy, History, Life Events, Organizing, Politics

Capitalby pikettyBy John Lawrence

It has finally dawned on the American consciousness that wealth is being concentrated among fewer and fewer people. In fact just 400 Americans own more wealth than the bottom 180 million taken together.

Thomas Piketty in his ground breaking book, Capital in the Twenty-First Century, shows the dynamic behind this dramatic rise in wealth among the upper echelon of society while everyone else, in particular the middle class, is being left in the dust.

It wasn’t supposed to happen this way. Labor saving devices and later computers and automation were supposed to create a virtually utopian society in which everyone could work less and have an ever increasing standard of living.

Instead, we have created a dystopian society where the fact that there is less need for workers means that unemployment is much more widespread. Instead of wealth being ubiquitous, unemployment is. The goal should have been widespread or democratized wealth resulting in less of a need for individual labor because each individual or family would be able to derive much of their income from their wealth in the form of a Return on Investment (ROI) just like the “wealthy” do.

When I was a kid, I read a comic book story about the ideal family situation. In many ways the author had it right. Labor saving devices (computers and robots had not been invented yet) did all the household work. A dispenser on the wall coughed up several thousand dollars every month. There was no need for work at all. The only hitch was that the family was not allowed to go out of the house. Ouch. But were it not for that caveat, this story, projected into the future, was the idea of how future generations would live – basically the way the wealthy have always lived.

With the internet, money can easily be spent and packages delivered without ever leaving the house although the author could not have even envisioned that scenario. If wealth were democratized instead of concentrated among a very small group of people, everyone would indeed be living that lifestyle today – working only a few hours per week and deriving most if not all of their income from accumulated wealth.

So what is the solution to this dystopia we have created? Some call for a revolution, a top down radical change at the national level, that will filter down to all levels of society. It was tried at least once and it didn’t work. The Soviet Union was an acknowledged failure, and the French revolution ended up in Napoleon’s dictatorship – hardly a Republic.

food coop signAlternatively, others are calling for the step by step, bottom up creation of a society in which organizations and enterprises are owned cooperatively, in which everyone is a worker/owner. The surprising thing is that this is being done in the present tense and is a movement which is well under way although the mass media would never tell you about it.

Why? Because it is threatening to the ossified status quo that just wants to continue amassing wealth for themselves, and they have a well oiled (pun intended) system for doing so. They do not want a society composed of worker/owners; they want a society composed of consumers of their well established product lines.

Consumption is 70% of GDP. Every politician wants this figure to go up when, for environmental reasons, it needs to come down. Fossil fuels need to be left in the ground if we are to escape the worst effects of global warming. Increasing GDP under the present system means increasing greenhouse gasses due to increasing energy demands.

Decreasing GDP – and concomitant energy demands – means giving up trillions of dollars of coal, oil and gas investments that the extractive industries have already made and foregoing revenues and stock values that they are counting on. This is something Wall Street would frown on, and the energy companies would likely be sued by their investors.

The co-op movement has the advantage of not requiring a top down revolution and is the most promising way for democratizing the ownership of wealth because it doesn’t require any laws to be changed. It doesn’t require any lobbying; it doesn’t require any violence except maybe to the bank accounts of Wall Street and the fossil fuel industry.

It represents a progressive systemic change in society that is well under way. That’s important because the US political system has been characterized as being in gridlock. That’s a very charitable description indeed because in actuality it’s not in gridlock; it’s in dysfunction. The fact that the US is completely dysfunctional on a national level makes a strategy of localization all the more important. What is needed is an economy that is built on the local level one enterprise at a time by and for local citizens.

The way the economy works now is that large international corporations take money out of the local economy and concentrate it in the bank accounts of a few wealthy people.

For instance, consider WalMart. The Walton family heirs collectively are the richest single family in the US. Profits from local WalMart stores do not go back into the local community. Instead they are siphoned off from the local communities in which Wal-Marts are located and sent to Bentonville, Arkansas, WalMart corporate headquarters, and from there they go into the pockets of the Walton family heirs who invest them on Wall Street. They don’t spend them in the local economy or indeed in any economy because they’ve got so much money, they can’t spend it all. Instead, it just piles up as stagnant investments in the financialized economy.

A co-op would not send the profits out of the local community but instead they would go into the pockets of the worker/owners of the enterprise who would spend them in the local community with the result that money would be circulated locally instead of being siponed off in one shot and ending up in the pockets of a few of the aforementioned 400 richest individuals in America.

The same applies to other international corporations that have replicated themselves throughout the US and indeed throughout the world. They have replaced the local Mom and Pop stores which were locally owned and from which profits circulated among local enterprises many times instead of going to Wall Street in one fell swoop. The co-op movement represents a shift back to local rather than international corporate ownership and a movement away from the concentration of wealth to a more democratized distribution of wealth.

coops workThere is no reason why a local co-op could not provide the same services as does a WalMart or a Home Depot or a Walgreen’s or a Fry’s electronics, companies which have metastasized themselves worldwide resulting in a concentration instead of a localization of wealth, for after all, all they are doing is buying products wholesale and selling them retail. It’s not rocket science. It just takes an ability to unload trucks and stock store shelves. Computers do the rest including even checkout!

There are many examples of successful co-ops already in existence.There are a number of worker owned businesses in the state of Ohio, for example. In 1977 a very large steel mill in Youngstown was closed down resulting in 5000 workers losing their jobs. Long story short: the workers and the community got together and put the steel mill back into operation as a worker owned enterprise.

There is a support system for the establishment of worker owned businesses at Kent State University called the Ohio Employee Ownership Center. They provide assistance to workers who want to own their own factories and stores and other businesses. Many successful businessmen, aided by favorable tax benefits, now sell their businesses to their former employees when they retire.

Gar Alperovitz reports in his book, “What Then Must We Do?” the following information:

As time has passed, new priorities and another set of alliances have begun to develop. Now, all of the linked worker-owned companies are very, very green by design. For instance the Evergreen Cooperative Laundry [part of Evergreen Cooperatives, a group of worker-owned businesses launched by Cleveland’s largest foundations and anchor institutions] operates out of a LEED Gold-certified building and uses (and has to heat) around one-third the amount of water that other commercial laundrys use and heat. Evergeen Energy Solutions is poised to install twice as much solar capacity in the coming period than currently exists in the entire state of Ohio. And Green City Grocers Cooperative – a three-and-a-quarter acre hydroponic greenhouse (the largest in any American city) – currently produces some three million heads of lettuce a year along with hundreds of thousands of pounds of herbs. (Two new cooperative businesses are scheduled to come online each year as the building processes continue.) Then there is Organic Valley, the $500 million leader in the organic dairy industry, which is also a cooperative of family farms.

It should be obvious that worker owned co-ops are very involved in the communities in which they operate unlike international corporations whose only allegiance is to the bottom line. In fact they can be sued by their investors if they should have the audacity to deviate from the bottom line and try to do some good in local communities.

Co-ops come in many different organizational forms from credit unions with very little democratic participation to forms in which worker owners are directly involved in decision making. For example, there is the B corporation, legal in California but not in every state, which allows the corporation to not be totally addicted to pursuing the bottom line. These corporations are allowed by law to be do gooders in the communities in which they operate. Patagonia Corporation, the outdoor apparel and sporting equipment retailer, is an example

More than 130 million Americans – 40% of the population – are members of one or another form of cooperative. Some of these are agricultural and electrical co-ops dating back to the New Deal in the 1930s. The outdoor recreational company, REI, is a co-op as is hardware purveyor ACE Hardware. In Madison, Wisconsin there is a worker owned cab company, Union Cab, with over 200 worker/owners and annual revenues of over $7 million. I could go on and will in another article.

In San Diego there is the Market Creek Plaza, a $23.5 million cultural and commercial project anchored by a shopping center. The initial public offering was limited to neighborhood residents who are accumulating wealth as the share price goes up.

A total of 415 investors representing 600 residents and other non-profit and for-profit organizations purchased shares at the outset. A new neighborhood foundation owns another 20% of the shopping center thereby providing a funding stream for future community wealth-building efforts. The Jacobs Foundation which initiated the project intends to exit in 2018 with ownership to be split among community residents and the neighborhood foundation.

There is also The Village at Market Creek. From their website:

Market CreekThe Village at Market Creek was given Gold status because it demonstrates what can happen when residents own the vision and are involved in the decision making process from the beginning. The Diamond Neighborhoods of southeastern San Diego are among the most culturally-diverse communities in the nation. Located just minutes from San Diego’s thriving downtown area, these neighborhoods have endured decades of disinvestment. Once defined by widespread blight, this community is undergoing a resident-led renaissance.

As the result of a unique partnership between neighborhood residents, the Jacobs Center for Neighborhood Innovation (JCNI), and a large network of local and national investors, these abandoned sites are being transformed into a thriving commercial, residential, and cultural center known as The Village at Market Creek.

Good things are happening in San Diego, around the country and indeed around the world. The Mondragon Corporation, the grandaddy of all co-ops located in Spain’s Basque Country, has over 80,000 owner employees, annual revenues of over $14 billion euros, assets of $35.8 billion and operates 257 businesses and co-operatives worldwide. More on Mondragon here.

So the co-op movement is a step by step approach to build economic democracy and widely distributed wealth ownership from the ground up. It is a movement well under way and expect to see a lot more reported here in future editions of the San Diego Free Press.

{ 7 comments… read them below or add one }

Bearded OBcean October 16, 2014 at 9:06 am

This article is riddled with assumptions that leaves more questions than answers, in addition to so many contradictions. Where to being…

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John Lawrence October 16, 2014 at 12:23 pm

But I guess you’re too busy to even point one assumption or contradiction out. Where to being …??? Too busy to spell too?

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Bearded OBcean October 16, 2014 at 2:30 pm

Shame on me for a writing being instead of begin. My sincerest apologies. You assume that the wealthy don’t work for their wealth in your article when referring to the sci fi article. That doesn’t make any sense. For the same reason that a truly libertarian society would and could likely never exist, so it goes with your utopian ideal. The Soviet Union didn’t falter because of their top down attempt at socialism, but rather because the government murdered millions who did not line up to their ideology and they ran a government where the wealth was concentrated among the very few, never allowing the masses to build their own (in addition to several other factors). What happens when a product cannot be produced locally because the skills or resources are not available? What happens when another group of owner/employees do not want to trade a good because they don’t find it beneficial to their bottom line? It would seem that running a business amongst owners/employees is a much small and easier mission when focus is limited to a singular function.

It’s interesting that while you’re discussing the mess that is national politics, you take the much more conservative viewpoint in advocating for federalism. However, democracy was never supposed to be easy. It was never meant to be clean. Competing ideologies are just that, competing for a view that they find best for their country, city, etc.

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John Lawrence October 17, 2014 at 8:55 am

“You assume that the wealthy don’t work for their wealth in your article when referring to the sci fi article. ” Wealthy heirs in fact don’t have to work for their wealth. That does not mean that they do not work, however, and in fact they might work to create even more wealth. The fact is that, if you have enough wealth that you can live on the return on your investments, you don’t have to work. Say for instance you own an apartment building and you make a hundred thousand in rent each month. You could probably live off that, right?

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Bearded OBcean October 17, 2014 at 10:43 am

Inherited wealth accounts for about 15% of accumulated wealth amongst the top 1%, and those who twiddle away their days of that group is considerably smaller still.

Sure you could live off $100k per month, but what is your debt service? Likely a large chunk of that $100k. You can live off it, but why assume that wealthy don’t work? That focus weakens the argument.

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Citizen Cane Larry OB October 17, 2014 at 9:53 am

John, do you have any examples of tool rental co-ops? Maybe something that also involved shared workshop spaces and some sort of training.

Reply

John Lawrence October 17, 2014 at 6:44 pm

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