Cooperative Business Models, Consumer and Worker Cooperatives

Image of the international cooperative alliance's logo: a rainbow changing into doves.

The Flag of the International Cooperative Alliance. Image by Francisco Gregoric.

Did you know that over 1 Billion people on this planet are members of cooperatives? Cooperation in the US, as well as internationally, has had a rich history of experimentation and has taken many forms. There are many different types of cooperatives: worker, consumer, housing, hybrid, financial, agricultural, and health, to name but a few. In this article I will discuss the basic attributes of worker and consumer cooperatives. In future articles, we will delve further into the meaning of cooperation and cooperative history in the United States and abroad. I hope this post is useful for our readers, and as always, if you have any questions please feel free to ask us in the comments section at the bottom of this post.
While there are differences in how every cooperative is structured, one of the core tenants of cooperativism is the principle: one member, one vote. This differs from a stock traded corporation, where in that model the number of votes a person is determined by the quantity of stocks that person owns. The major dividing line in determining the type of cooperation of entity is how that cooperation determines its members.

Consumer Cooperatives

Consumer cooperatives base their memberships on the purchasers of materials. Imagine if you lived in a small town and there was only one store, but that store had exorbitantly high prices. Unable to afford the prices of basic commodities, you talk to your neighbors and decide to pool your money to buy in quantities large enough to receive the wholesale price that the local store pays. You then divide up the goods purchased and distribute them without the added overhead cost of the greedy merchant. This is the fundamental logic of consumer cooperation. Consumer cooperatives are and have been historically very popular in rural areas where competition is scarce.

One example of consumer cooperation that is still popular today is the Electric Consumer Cooperative. Electric consumer cooperatives serve over 42 million people in 47 states in the United States and employ over 70,000 people. Electric cooperatives became popular as a means for rural residents to have access to electricity when corporations did not feel there was enough profit to be made due to higher costs associated with setting up the infrastructure.

Symbol for the National Cooperative Grocers Association

Logo of the National Cooperative Grocers Association, an association of consumer cooperative food stores.

Consumer cooperatives work because their members are invested in the business. In consumer cooperatives, the consumers get to help decide what products the cooperative will carry and are also able to set the over head costs. The National Cooperative Grocers Association (NCGA) represents a 122 member and associate cooperatives that run nearly 160 store fronts and sell about $1.3 billion (USD) a year.  The NCGA itself is a cooperative association that assists cooperative grocers in collective marketing and advertising campaigns as well as policy coordination at a national level. Consumer cooperatives allow members to have access to at affordable prices products that matter to them. Cooperative grocers are known for being on the forefront of the organic and natural foods movement. You may already be purchasing from a consumer cooperative without evening knowing it!

Worker Cooperatives

While worker cooperatives share the participatory democracy model of consumer cooperatives, the members of worker cooperatives are the workers themselves and not the consumers. The worker cooperative movement in the United States has had a rich history dating back to before the civil war and has sprung up in every social and economic movement since then. The basis of the worker cooperative argument is that man (and woman!) should be free to pursue his creative interests and should not be subject to the mercy of any other man or woman for his survival. Worker cooperatives promote the ideals of self reliance and community. Worker cooperatives return the bounty of a workers labor back to the worker and not to a CEO. There are three major themes as to why one should support worker cooperatives: economic, sustainability, and community.

Economic Argument

United States Federation of Worker Cooperatives Two Pines Symbol

The Two Pines Symbol of the US Federation of Worker Cooperatives

The division of wealth in a society determines how a society will behave and how the members of society will interact with each other. If you have a society that has all of the wealth and land concentrated in the hands of a few families you will have a society that is much more despotic, unequal, and full of political unrest. In such societies free speech is a luxury and the mass majority of people have no control over the direction of their lives and are at the whim of the feudal master. On the other hand, societies with a more equal distribution of wealth tend to be more democratic, have better government infrastructure (e.g. universal health care, social security, environmental protections, and effective public safety agencies), and the quality of life is generally better.

Worker cooperatives support a more equal distribution of wealth. They advocate for fair wages and independent control of the means of production. Worker cooperatives believe that those who labor to produce something should bear the fruits of their labor and should not be paid an amount that has been diminished from the exorbitant salaries of CEOs. When you purchase from a worker cooperative you know that the workers are being paid a fair price and that they are in control of their own destinies.

Sustainability Argument

Since the workers of worker cooperatives are equal owners of the corporation they have an inherent interest in seeing the worker cooperative succeed for the long term. In contrast to a stock traded company where the owners only have the short term interest of seeing the value of their shares rise by the next quarter, worker-owners are interested in seeing the company continue its success for the long haul because the cooperation is their livelihood. This prompts the workers to make choices that will make their business sustainable into the future. Additionally since workers are not just making choices based on short term profits, they are interested in making long term investments that will often increase the environmental sustainability of the company.

For instance, here at Co-Soap we are planning on switching to all organic ingredients by the end of the year and are trying to source 75% of our ingredients locally to reduce our carbon foot print. We are doing it because we genuinely believe that as producers we should take steps to reduce our adverse impacts on the planet.

Community Argument

Workers of worker cooperatives are not just faceless suits from other cities, states, or even countries. The workers of worker cooperatives are active members of the communities that you live in. They use their voting power to support local community projects. Worker cooperatives, like general small businesses, support local communities in ways that big corporations never would. They are free to stand up for local political causes and to work with city halls to make policies that improve the lives of everyone. Worker cooperatives are free to make choices that are not based on profit maximization.

Conclusion

Above I have outlined some of the aspects of consumer and worker cooperatives. In future articles I will go deeper into the economic, sustainability, and community arguments for worker cooperatives. I hope you enjoyed this brief summary and feel free to leave your opinion / questions below.

Sources

Further Reading

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