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Issue 2: Community Scale Economics

Cooperatives

by Steve Bodzin

For 200 years, cooperatives have been proving that democratically controlled businesses can meet the need for healthier products, workplace environments and business-community relationships. Today, there are 700 million members of cooperatives worldwide, providing everything from grain elevator maintenance to Internet access.

Cooperative History

As modern industry took shape at the end of the 18th century, people began creating organizations through which they could buy products as a group, without giving extra money to a commercial middleman. The most celebrated early cooperative was the Rochdale Equitable Pioneers Society, a simple buyers, cooperative founded in England in 1844. Twenty-eight men decided to buy their food together to get wholesale prices. Pooling their money for initial equity, they created a business that would not have outside stockholders and would not be run for its own sake. Instead, its purpose was to defend the interests of its member consumers. New members could join by buying in with a set investment, and were then equal to all other members in terms of voting and ownership rights. Shares could not be sold at a profit. After some of the year's profits were reinvested in the business and set aside for the education of members and workers, the rest were redistributed annually to members, rebating them a percentage of their year's purchases. These basic tenets persist among cooperatives today, with some additions.

Consumer and Worker Cooperatives

There are several types of cooperatives. Consumer cooperatives, based on the model of the Rochdale Pioneers, are most often associated today with health food stores but are not limited to edible industries. Sportswear giant REI is one example of a consumer cooperative that is not related to food purchasing. Worker cooperatives are businesses owned and controlled by employees and can be found in nearly any type of business. Within San Francisco, worker cooperatives include Rainbow Grocery and adult bookstore Good Vibrations. In agriculture, worker cooperatives are most common among farmers, who pool resources to gain the benefits of being a large business. Sunkist, an alliance of small Florida orange growers, is one of the most recognizable producer cooperatives. Finally, non-profit housing and land cooperatives buy buildings and provide real estate for members, taking the properties off the speculative market. This article focuses on the first two types: consumer and worker cooperatives.

Consumer cooperatives often create stores to sell goods bought at wholesale prices. At many cooperatives, one must become a member to buy from the stores. Other cooperatives, which do not require membership, still offer incentives for consumers to buy a share in the company: most rebate a portion of purchases at the end of the year, and there may also be opportunities to take part in managing the store. Each person is generally limited to one share in the business, assuring equal voting rights for all members. The shares come with responsibilities, ranging from annual fees to periodic labor. At the Harvard Cooperative, a student-run campus bookstore in Cambridge, Massachusetts, the price of an annual membership has not gone up since 1882 -- it's still $1. Seattle-based REI charges $10 for a lifetime membership. On the other hand, the Park Slope Food Cooperative in Brooklyn, New York, demands 2.75 hours of work every four weeks -- a membership cost of over $300 per year if labor is valued at $10 per hour. Larger cooperatives usually employ a staff in addition to relying on volunteers, but employees are generally members of the cooperative as well.

Worker cooperatives, also called collectives, are associations of workers, rather than of consumers. In collectives, workers can keep the excess profits from their work and can make decisions based on what's best for themselves and their communities, rather than for distant stockholders. Employment is normally limited to members. Usually, new members are accepted after working at the business a set period of time. Collectives also commonly minimize wage differences among workers, discourage excessive specialization, and encourage participatory management through committees.

One exceptional set of collectives is the Mondragon system in the Basque region of Spain. It has grown steadily since it was founded in the 1930s to over 100 enterprises, including a major bank, a large construction company and appliance companies. Mondragon is now making a point of competing with large capitalist businesses on capitalist terms, opening non-member offshore factories and hiring as many as 40% non-members in a particular business. But Mondragon's recent changes are the exception, not the rule.

Peter Hough, a Canadian cooperative specialist, says, "Membership in a worker co-op is much more important to the member when compared to membership in consumer co-ops and credit unions, as workers, livelihoods depend upon the success of the cooperative.

At both worker and consumer cooperatives, the members control the decisions and own the equity. So when there are profits at the end of the year, they can choose how much to re-invest and how much to pay the owners -- themselves -- as a dividend. All decisions about investment, purchasing policy, staffing, store design, community relations, and even charitable contributions, are made by the members. That means that there are different structural interests in place than when an elite core of managers or a board of directors at a typical company make decisions that impact the entire company but serve only the shareholders. According to cooperative members across the United States, it is far less likely that business practices will be detrimental to workers, consumers or local communities when people from those constituencies are making the decisions.

There are far more consumer cooperatives than worker cooperatives in North America today, and while consumer cooperatives can thrive on a large scale, worker cooperatives seem to stay truest to their missions when they are small and local. REI, for example, is a national consumer cooperative with 11 stores from Anchorage to Atlanta. Worker cooperatives, on the other hand, rarely grow bigger than the Edmonton, Alberta, Co-op Taxi Service, which employs nearly 500 workers. When collectives get bigger, they become harder to run democratically and keep competitive. The Mondragon cooperatives in Spain have chosen efficiency at the expense of democracy and are flourishing, while the Sunkist growers, cooperative in Florida has remained democratic but has been rapidly losing market share. Among the worker cooperatives currently thriving in the United States are Rainbow Grocery, San Francisco; Burley Design Cooperative, Eugene, Oregon; and Equal Exchange coffee importers, Canton, Massachusetts.

Vive la Difference

Cooperatives often draw on values from environmental and social justice movements, and thus create very different connections to their communities than purely profit-driven companies. It is also no coincidence that many cooperatives share roots in the social rebellions of the 1960s and 1970s. Reading the mission statements of cooperatives, the connections are often overt. For example, bicycle manufacturer Burley Design Cooperative's information sheet begins, "Back in 1975, a group of bicycling enthusiasts realized a common desire: create a fair, humane, energizing, and positive workplace, with a commitment to environmental protection and a dedication to promoting human-powered transportation. As this example illustrates, cooperatives distinguish themselves in three ways: their products, their environments, and their relationship with the community.

Their Products

Cooperatives have had the greatest success where more mainstream businesses have neglected a group of consumers or the demand for a product. For almost 20 years, from the bike boom of the early 1970s until the growth of bicycle advocacy in the early 1990s, the bicycle industry all but ignored cycling as practical transportation. So environmentally minded people were forced to start their own manufacturing operations and shops. Bicycle repair cooperatives in cities from Gainesville, Florida, to Berkeley, California, provide people with cheap, fossil-fuel-free transportation. Working in tandem with these cooperatives, bicycle design and construction collective Burley Design and Independent Fabrications provide some of the world's most reliable and practical bikes and trailers. Indeed, the cooperative bicycle industry has grown into a self-supporting subculture. Another manufacturer, the non-profit Center for Appropriate Transportation in Eugene, Oregon, provides freight bikes able to carry up to 800 pounds to Pedal Express, a delivery cooperative in Berkeley, which specializes in heavy freight and large mail runs that would otherwise be done by motor vehicles.

To a lesser degree, the same pattern has prevailed for the most ubiquitous cooperative business, the health food store. Organic, "whole foods were all but impossible to get at for-profit supermarkets until recently. Healthful baked goods continue to be unavailable from large manufacturers, due to their short shelf life. This provides a niche for naturally small and community-responsive cooperatives. For generations, these stores have dotted the American landscape.

For-profit retailers, however, have taken a big bite out of that market in the past three years. The spread of high-end micro bakeries in the San Francisco Bay Area, for example, ended up shutting down the venerable, collectively run Uprisings Bakery in Berkeley. On a larger scale, the last several years have seen the growth of supermarket chains like Whole Foods and Wild Oats, offering organic produce, supplements and groceries. Still, it is not uncommon for cooperatives to compete successfully. The Park Slope Food Cooperative in Brooklyn carries mostly health foods and environmentally preferable products. By charging a straight 20% above wholesale on all products, the cooperative charges much less for the same bag of groceries than the for-profit health stores in the same neighborhood. The difference in price is the result of the cooperatives, low labor cost, thanks to the volunteer time of 5,700 members.

In the words of one member, Amy Baxt, "In terms of straight economics, if I value my time at $15 or $20 per hour, it's probably not worth it. But I count my time differently than money. I don't mind contributing time to this each month. It's better than paying $3 for a stick of organic broccoli.

Another area where collectives have found a home has been in independent publishing houses and bookstores, where the increasing homogenization of large booksellers continues to leave a void. South End Press (publisher of Z Magazine), the anarchist-oriented AK Press and Arbeiter Ring in Winnipeg, Manitoba, are all collectives. Independent bookstores, including San Francisco's Modern Times, Portland's Laughing Horse and Cambridge's campus bookstore behemoth are all member- or worker-owned. San Francisco's Good Vibrations, a worker-owned collective that offers adult books and videos, stands virtually alone in the adult market by seeking to attract women as well as men with clean, well-lit and women-friendly stores.

Their Environments

Another way in which cooperatives differ from most for-profit businesses is in the design of their retail spaces. According to Tim Huet, a cooperative industry lawyer, there is often less division between "customer space and "work space than at the typical store. He cites the Cheese Board in Berkeley and the Ariz Mendes cooperative in Boston as having "no separation between shopping and production."

That would not have happened if they had not been worker-owned businesses, he says.

At bicycle repair cooperatives, the repair stands are out in the front of the store, rather than hidden behind the counter. Where the tools at most shops are secured far from customers, the equity- and education-minded cooperatives persist in providing a full range of loaner tools and repair classes to members. Many cooperatives also demonstrate commitments to social responsibility, and these benefits are extended to workers and member-customers alike. The Rainbow Grocery in San Francisco, for example, offers a child care center so adults can work or shop knowing their children are in good hands -- those of their own colleagues.

In an extreme example of the blurring of customers and workers, it is not unusual to hear P.A. announcements at the Park Slope Food Cooperative asking shoppers (who are all members), "Does anyone know how to work the register-- We need help.

Like their operating values, the physical plants of cooperative businesses often reflect environmental consciousness as well. At Rainbow Grocery, green design is obvious throughout: the building is an adaptive reuse of a truck showroom, the store is mostly daylit, green wastes are composted, organic demonstration gardens provide landscaping, and plenty of bike parking is available. At the 25-year-old Park Slope Food Cooperative, a 1991 retrofit was ahead of its time in providing ammonia-based air conditioning for high-energy efficiency with no ozone depletion potential. In an upcoming expansion, according to Joe Holtz, the store's paid general coordinator, the system is likely to be expanded to cool the store's refrigerators by a long loop of glycol. That will eliminate the last of the CFCs, HFCs, and HCFCs from the store and dramatically reduce the amount of refrigerant needed.

Community Relations

Cooperatives also have very different relationships with their communities than most for-profit businesses. Because they are owned by members from the local area, cooperatives engage in many of the behaviors lauded by author Michael Shuman (see feature article pg.17). Whereas in a for-profit company, stockholders can sue their managers for making decisions that hurt the bottom line, cooperatives can be far more socially responsible in their behavior. For example, they can choose not to buy from non-union contractors or to use only locally produced materials, even if those decisions will decrease dividends to the member-owners.

Erbin Crowell, one of the founders of Equal Exchange, says, "If we were owned and controlled by stockholders, I don't believe that it would be likely for our mission, which directs a huge amount of our resources to the small farmers we work with, to last very long.

Another unique aspect of cooperative business is cooperation among cooperatives -- which can lead to remarkable community-building. For example, Pedal Express, the Berkeley delivery company, has arrangements with other community-oriented businesses to improve their services without costing them a bundle. Cody's, a local independent bookstore, works with PedEx to offer same-day home delivery of reading material, in an effort to compete with Amazon.com. PedEx also delivers newsletters for BREAD, Berkeley's collectively managed local currency. (see "Comunity Currencies pg. 42) PedEx services are not limited to print material, however, the cooperative delivers vegetables for Berkeley Youth Alternatives, a youth training organization that runs a community-supported agriculture program from its urban farm. "

We deliver their food to targeted neighborhoods in Berkeley and Oakland, says Dave Cohen, a PedEx founder. "We also eat the food, which fuels the deliveries.

Cooperation among cooperatives can also lead to creative benefits for participants. Members in the Network of Bay Area Worker Collectives (NoBAWC, pronounced "No Boss) generally give worker-owners from other collectives a 10% discount. Volunteers and paid staff at San Francisco's Red Vic Theatre, a collective art-movie house, are paid in part with theatre passes. These passes, in turn, become a form of local currency, accepted at like-minded businesses. --

Steven Bodzin is a writer and land use activist for the Congress for the New Urbanism in San Francisco. He has written previously for Home Energy and Wired News.

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