Cooperatives are associations freely created by a group of people to meet their shared needs and to achieve their common purposes. They are democratically controlled organizations in which the ownership, benefits, risks, and losses are shared. They constitute the “third sector” representing the social economy paradigm as an alternative to current globalization trends. Cooperatives are based on trust, self-esteem, shared responsibility, the common welfare, solidarity, and mutual assistance—values that contrast with competition, individualism, control, and coercion, which characterize the private enterprise.
Cooperatives are created to meet different economic and social needs and purposes of its members. There are cooperatives of production, consumption, banking, housing, community development, and others to solve shared problems related to education, health, employment, culture, and recreation. Their economic relevance, though not widely recognized, is unquestionable. Some available data indicate that more than 800 million people worldwide are involved in a cooperative; they are a very important source of employment, redistribution of wealth, and social equity.
The idea of cooperatives is not recent. Their origin can be traced to the beginning of the 19th century, when the utopian socialists began imagining new forms of organization. Robert Owen and Charles Fourier, for example, conceived cooperatives as an alternative organizational arrangement compared to capitalism and competition. The Rochdale pioneers also developed cooperative experiences in the interests of its members under some main principles: Voluntary and open membership, democratic control, economic participation, autonomy and independence, education and training, cooperation with other cooperatives, and concern for the community’s interests. One of the most remarkable examples of the 20th century is the successful Mondragón Cooperative Corporation in Spain, which has demonstrated some advantages of cooperatives over traditional capitalist enterprises.
Cooperatives remain an important organizational option in the 21st century to overcome the failures of multinational corporations and the market economy to ensure economic development and to meet the social needs of the majority of the population. Cooperatives formed from the factories recovered in Argentina reaffirms that workers are able to run companies and to design and control their own work.
The autonomous Zapatista municipalities in Mexico are also a good example of the possibilities of cooperatives to solve community problems. The cooperative movement is increasingly seen as an important option for social change in favor of economic democracy and social empowerment.
Cooperatives are distinguished from private companies by their purposes, their governance structure and their modes of operation. Their purposes are shared; they protect the interest of the association under a principle of solidarity, instead of individual goals. Management involves the active participation of its members. Decision making is accomplished through an equal distribution of power because each member has a vote regardless of the contribution that he or she has made to capital. Their governance structure can be represented by an inverted pyramid in which the members of the cooperative are the highest authority and the board of directors depends on them. Finally, their mode of operation is collaborative, and is based on mutual aid and shared responsibility.
Some characteristics raise important advantages compared to private enterprise and its traditional bureaucratic structure based on a vertical division of labor and centralized decision making. Members of the cooperative are highly motivated people disposed to collaborate: They appreciate their position as coowners, so they know everything they do or cease to do has an impact on performance, results, and profits. Cooperatives adopt a flat scale of remuneration to avoid large wage differentials between levels, which means greater internal equality; they attain a greater internal cohesion based on collaborative work to reduce direct control and hierarchical authority. In addition, inter-cooperative collaboration facilitates the creation of tools like mutual support funds to overcome temporary difficulties, producing solidarity economy initiatives that favor local development. Teamwork and participation reduce the required bureaucratic apparatus and, consequently, their operating costs. Finally, benefits produced by the cooperative do not have to be given to external shareholders, which propitiates a greater social distribution of profits.
However, cooperatives also confront some difficulties and problems. On the one hand, globalization of markets increasingly presses cooperatives to compete with private companies, which has led to the need to adopt more entrepreneurial forms that threaten their nature and purposes. Needs of the members of the association are gradually displaced by the imperative of growth and accumulation that all economic enterprises need to survive in highly competitive and dynamic markets. Cooperatives appear to be trapped in a dilemma because economic success seems at odds with social effectiveness.
On the other hand, democratic governance of cooperatives involves more time to make a decision, delaying opportune responses demanded by dynamic markets. In addition, such democratic structures do not imply necessarily the democratization of the production processes and the introduction of participatory arrangements to favor collective solution of problems at work. This contradiction between democratic governance and authoritarian shop practices generates frustration among the members of the cooperative, because they know they can participate in main decisions but, at the same time, they realize they are excluded from the day-to-day decisions in their workplace.
The accumulated experience of cooperatives is very important for the future. Emerging social movements are increasingly demanding greater participation to prevent abuses of the state and corruption of large private corporations; cooperatives reemerged as an alternative that could lead to building a new social project to transcend the current market economy and globalization. This option would be based on a growing social participation to establish new institutions of regulation of state actions as well as private economic freedom, allowing a real economic integration of the world based on the general well-being of society.
- David C. Korten, The Great Turning From Empire to Earth Community (Berrett-Koehler, 2006);
- William Foote Whyte and Kathleen King Whyte, Making Mondragon: The Growth and Dynamics of the Worker Co-operative Complex (ILR Press, 1991);
- Kimberly A. Zeuli and Robert Cropp, Cooperatives: Principles and Practices in the 21st Century (University of Wisconsin–Extension, 2004).
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