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Cooperatives: Capitalism With a Heart

by Rebecca Nole

 

“Cooperative” was the word chosen to describe Riverwest in the recent Around the Corner episode on Milwaukee Public Television. What is a cooperative? Since 2012 was dubbed the United Nations International Year of the Cooperative, this might be a good time to answer that question.

The origins of the cooperative or co-op model are typically credited to a group of weavers in Rochdale, England in 1844. Unable to afford supplies individually, the weavers pooled their resources and opened a consumer-buying co-op. And so a model was born.

 

What is a Cooperative?

One of the great attributes of the co-op model is its flexibility and diverse applications. The trick answer is: lots of different types of businesses are co-ops.

There are two commonly used definitions that help to frame how co-ops are conceived. The International Co-operative Alliance (ICA) defines a cooperative 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.” What a mouthful! A second definition from the United States Dept. of Agriculture (USDA) explains that “cooperatives are user-owned, user-controlled businesses that distribute benefits [to owner members] on the basis of use.”

When combined, these two definitions capture four primary cooperative principles: voluntary participation, user ownership, user control and proportional distribution of benefits.

 

Why Cooperate?

Cooperatives offer many advantages that other businesses cannot. Saving money for their patrons while providing the best quality products at the lowest cost, they allow for greater economic democracy and self-determination.

Since they operate for the benefit of their user-owners, co-ops can easily adapt to reflect the diverse and changing needs of their patrons.

Co-ops operate within capitalist economic systems, and indeed thrive in the US economy. In a recent report produced by the University of Wisconsin Center for Cooperatives, 29,284 cooperatives were identified as active in the US economy with a combined pool of assets valued at $3 trillion, generating $500 billion in revenue and $25 billion in wages annually. By most conservative estimates, four out of every ten Americans is a member of a co-op.

The cooperative model can be adapted to a variety of businesses. There are food co-ops, housing co-ops, purchasing co-ops, retail/consumer co-ops, healthcare co-ops, insurance co-ops, electric/utility co-ops, agricultural co-ops, and even financial co-ops (credit unions).

Despite the diversity of goals and traditions in the co-op sector, all co-ops follow the cooperative principles. Co-ops are models that can be structured to fit the needs of its members based on the services they provide and type of business they perform.

Although certainly not an exhaustive list, here are some quick profiles for different types of co-ops.

Agricultural co-ops are owned and controlled by member farmer-producers, and operate for the mutual benefit of members on a cost basis after allowing for the expenses of the operation and maintenance. These co-ops play a vital role in North America’s food distribution system (including such well known brands as Sunkist oranges or Land O’Lakes butter).

Buying clubs are formed by a small group of people who jointly purchase goods and services from a wholesaler (co-op or otherwise) for their own needs according to Rochdale principles. Members typically share in the labor involved.

Child care co-ops are a group of families who jointly provide child care. Three models have been developed: parent model, employee model and consortium model.

Consumer co-ops are defined in the broadest terms to include all joint purchasing and production of goods, foods, or services by ultimate users organized on the basis of the Rochdale Principles. The Associated Press is an example, as are food co-ops or retail co-ops such as Recreational Equipment Incorporated (REI).

Credit unions are associations that provide financial services to members (personal loans, checking accounts, etc.) and are governed by a member-elected Board of Directors. Typically, a credit union consists of members of the same group: club, union, institution (such as the university or state government), etc.

Cooperative banks are owned cooperatively or formed to loan primarily to cooperatives. Cooperative Insurance is obtained by joining economic forces for purposes of obtaining most beneficial services and rates.

Food cooperatives. Whether a full line supermarket, or small specialty or natural food store, food co-ops are committed to consumer education, service product quality, truth in advertising and member control. At most food co-ops, both members and nonmembers may shop, but the benefits of membership include a voice in co-op policy, discounts or rebates for patronage and other specialized services.

Housing Cooperatives exist in many forms with a variety of focuses such as student, community, multi-family, apartment style, and land trusts. The co-op owns or leases the housing project, including all land, dwelling units and common areas and the tenant-member-owners have control and stewardship.

Producer cooperatives are owned and operated by a group of producers working either separate or together, for the purpose of aiding production and marketing. Ocean Spray is such a co-op.

Recreation cooperatives provide recreation services, either on a consumer basis, where users own the co-op, or on a producer-basis, where the people owning land and/or facilities as a co-op make them available for a charge. Co-op summer camps are an example of this type.

Utility co-ops such as rural electric or telephone co-ops, purchase power or service at wholesale and deliver it at cost to members. The distribution co-op is responsible for building and maintaining the lines, for purchasing electricity to meet members’ demands, for billing and providing information related to the co-ops’ function and organization.

Worker collectives are businesses owned and operated by workers. This model of ownership was prevalent in the late 1770s when groups of artisans joined to produce and market their own wares.

 

Both historically and today co-ops are most often developed and created in times and places of economic stress and social upheaval. Cooperative governance and member control make the model attractive to communities that might otherwise be disenfranchised. In the co-op governance structure, the membership has the greatest control and therefore the greatest responsibility for active participation.

Where are you a member owner?

 

Learn more:

nasco.coop

ica.coop

uwcc.wisc.edu

Cooperative Principles and Practices by Zeuli and Cropp,

Cooperative/Credit Union Dictionary and Reference