Nov 4, 2020

A Better Alternative: Worker Cooperatives

In the top-down capitalistic enterprises that dominate the market, workers whose labor produces the goods and services have no say in how the company is run. Instead, this power is given to the wealthy investors and shareholders along with the board of directors. These enterprises bend over backward to keep their investors happy while turning a blind eye to the demands of their workers. 


With this disproportionate distribution of power, it isn’t surprising that one out of nine U.S. full-time workers lived in poverty in 2017 (according to Economic Policy Institute, a nonprofit nonpartisan think tank) while the owners and investors amassed obscene wealth.

Throughout the years, the most popular alternative to this system has been traditional socialism. It sought to increase the government’s reach into the economy through varying mixtures of regulation of enterprises and markets, state ownership and operation of enterprises, central planning, etc. However, these policies have a history of ineffectiveness.

The Soviet Union's inability to allocate resources properly which led to a massive famine in the past and Venezuelans suffering from hyperinflation in the present are just some examples of its failure.

Similarly, Western Europe’s socialist parties embracing neoliberalism from the 1970s and Communist China becoming more and more capitalistic illustrate the trend of socialist entities shifting towards capitalism. Unfortunately, rapidly rising public interest in alternatives to capitalism has confronted falling confidence in traditional socialism.

Luckily, there is a much more appealing alternative at the micro-level that needs to be talked about more. It’s an efficient business model that produces goods and services in a way that is fair to its workers. This business model is called a worker cooperative.

Here, workers collectively own the firm, and every decision is made democratically i.e. each member, no matter what they do in the firm, gets to vote on the determination of operational structures, on how much they should be paid, what benefits they should receive, etc.

Having a financial stake in the firm and being an integral part of it strongly incentivizes workers to work and care more about their jobs. So, higher job satisfaction, quality of life, and productivity are some of the obvious benefits of a worker cooperative. A study at the London School of Business found that productivity increases between 9%-19% across the board in co-ops in comparison to capitalistic enterprises of the same industry.

Since worker cooperatives are mostly non-profit, they are free from the clutches of greed. Unlike capitalist firms, they don't have to relocate to places with lower wages or move production overseas to increase shareholder value. Similarly, they don’t have to undertake risky financial endeavors to maximize profit. As a result, they are much more stable and stay afloat even at times of economic crisis.

For example, in the 2008 financial crisis, non-cooperative banks in the US had to be bailed out by government money (approx $200B). However, cooperative banks stayed afloat since they didn’t undertake risky financial endeavors to maximize profit, and simply existed as a safety net for normal people providing loans and credit at reasonable rates.

The capitalistic firms’ never-ending journey to maximize profits has incentivized what has to be the most immoral and undemocratic practice of government lobbying to shape policies that propel their self-interest, often at the cost of harming citizens and their workers.

In 2019, according to OpenSecrets, a nonpartisan nonprofit independent research group, ExxonMobil, one of the largest Oil and Gas companies in America, spent $9,750,000 lobbying the government to delay, control or block policies to tackle climate change. In this way, corporate leaders possess unprecedented power in shaping policies that affect the lives of countless people.

A worker cooperative snatches this power from the board of directors and distributes it to its workers. Workers get to decide how and where to spend their profits and most of the time, the profits get reimbursed to consumers or are spent on projects to improve the lives of everyone involved with the company.

For example, United Cooperative Services, which has been providing electricity to Texans for decades, used profits to build a network of solar panels so they could offer renewable energy to consumers at a lower price than traditional energy companies.

The substantial benefits of worker cooperatives come with a host of complications. Firstly, since everyone has an equal vote and gets an equal share of profits, it is unappealing to investors who want a big return on their investment. Lack of investors might be a deal-breaker for capitalistically-organized enterprises that define failure in terms of profit rates or growth rates or market shares.

Secondly, co-ops have a different metric of success, which includes the welfare of workers and their families, of surrounding communities where they live, of the quality of life and personal development on the job, etc. where investors have little role to play.

Moreover, managing a system for sharing ownership in decision-making creates a unique burden on worker cooperatives that its capitalistic counterparts don’t have to bear. It goes without saying that giving every worker a say in the decision-making process can slow things down.

For example, at Black Star, a co-op brewery, it took years to build a cover on its patio - a task that takes only a few months. To make things better, workers must be instilled with egalitarian principles such as the ability to compromise and to give others the benefit of the doubt - something that isn’t the top priority in capitalist firms.

A worker-owner washes dishes in the kitchen of Black Star (Alana Semuels)

Worker cooperatives have succeeded and are very common in European countries like Italy, Spain, and France. Mondragon is the largest worker owned cooperative located in Spain which employs more than 80,000 people and has revenue of over €12 Billion.

Emilio Romagno is an area in Northern Italy where 30% of the GDP is produced by worker cooperatives, making it the most worker cooperative based economy of its size in the world. It is no coincidence that it has one of the highest median incomes in all of Italy and it also ranks on top in various indicators of social well-being.

In contrast, worker cooperatives are still rare in the U.S. and the rest of the world. To change this, we can start by letting more people know that a humane yet efficient business model exists.

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