Cooperatives: A Historical and Cross Cultural Perspective

The cooperative movements represent large, diverse alternatives to the dominant private-ownership model and the cooperative ideal has resurfaced many times during the history of modern industrial development. The worker-based movements of the 19th and 20th centuries stemmed from the displacement of previously independent workers into wage-labour, together with the low pay and insecurity of such labour. At the same time, farm-based movements were created to offset the power of large private enterprises to monopolize profits by gaining control of critical parts of supply chains such as the railroad and credit institutions. In some cases, local nationalism, religious cohesion, and successful worker-based struggles against fascist forces also provided a supportive environment. The over-riding driver was for a community to work cooperatively together to gain some control over their living conditions and well being. In many cases, if not all, the different strategies of labour unions, working class and nationalist political movements, and cooperative movements etc. were symbiotic and inter-twined forms of protective and mutual-aid organizations. As Fairbairn notes “The Rochdale Pioneers did not rise spontaneously from need, but were organized consciously by thinkers, activists, and leaders who functioned within a network of ideas and institutions. The same can probably be said of all successful co-operatives in all times and places: they arise from need–when some activists, institutions, or agencies consciously promote and organize them.1” Develtere also proposes that “co-operatives cannot be analyzed as distinct social movements … it is <their> relationship with other social movements which to a great extent accounts for the diversity and scale of cooperative activity”1.

Within the United States throughout the 19th century there were extensive and repeated attempts at establishing cooperatives as an alternative ownership structure, with many explicit proposals to replace the capitalist economic system with a cooperative one. Curl2 details the wide range and diversity of cooperative, and related social, movements throughout this period. He also notes the rapidity of the change from a nation of the self-employed (excluding slaves) to one of employees, “In 1800 there were few wage earners in America; in 1870 … over half the workforce consisted of employees; in 1940, about 80 per cent; in 2007, 92 per cent”13. The 19th century was also a period of highly disruptive economic panics3, and ongoing attempts to monopolize profits by financiers, middlemen, and transport monopolies which drove down farm profits and general wages while increasing retail prices. In this environment cooperatives were a natural reaction to both reclaim worker control and provide group support against external forces. Given these objectives there was a natural linkage with trades unions, and farmers unions, many of which looked to larger social change through cooperative enterprises. Voss notes that union leaders and labor journalists began to seek an alternative solution to strikes, “a more permanent solution” with cooperatives advocated as a way to “give workers absolute control over the disposal of … <their> labor”4. Examples are the National Trades Union of the early 19th century, and the National Labor Union, Knights of Labor, Grangers and Farmers Alliance in the post Civil War period. This was also a period of large scale immigration, which pressured wages but also brought in many with communitarian ideals who established mutual-aid cooperatives5. The cooperatives were stymied in many ways. The repeated economic depressions of the period bankrupted many, and the Civil War wiped out nearly every cooperative2. In addition, some of the more successful cooperatives converted into private ownership, while others failed due to managerial and other shortcomings. The private sector also worked hard to negate what they saw as a directly competitive sector, through such things as supplier and merchant blacklisting, unwillingness to provide financing, the absorption of losses over long periods to force the cooperatives out of business, legislative restrictions, and labelling cooperatives as the start of socialism. These activities paralleled ongoing anti-union activities, and were facilitated by the growth in the size and political organization of private sector organizations, together with the active support of the state6. The post-war Greenback movement can be seen as another attempt to move power away from these organizations, through the provision of capital directly to citizens thus removing the control of the private financiers. The peak of the worker cooperative movement was in the post Civil-War period, heavily sponsored by labour unions such as the Knights of Labor with visions of such cooperatives growing to become the dominant model within society, “to establish co-operative institutions such as will tend to supersede the wage-system, by the introduction of a co-operative industrial system”2. Curl proposes that the very success of the cooperatives during this period, together with the explicit visions of them as an alternative economic system, laid them open to attack2. In the aftermath of the Haymarket Affair of 1886, a “violent anti-labor campaign followed … The courts began to convict union members … Employers, taking advantage of the situation, instituted widespread anti-union campaigns.7” This extended to the cooperatives sponsored by the Knights of Labor, and by 1888 “none of the order’s cooperatives were in existence”7.

Curl notes that the consumer cooperatives that sold at close to cost, such as the Protective Union’s of the mid 19th century, were a threat to private profit-seeking enterprises as they undercut the market price, and were met with extensive resistance and attempts to undermine them. The “Rochdale Model” of consumer cooperatives, which sold at close to market price and paid a dividend to its members, fit within the market constraints and thus was less of a threat to competing private enterprises2. The consumer cooperatives were also less of a challenge than the producer cooperatives, in that such cooperatives were owned by their customers, and not by the workers who were just as much wage-labourers as those in private enterprises. Such a division between operating within the system, and operating against the system, can be seen in the contrast between the relatively conservative AFL (American Federation of Labour) union and the other more radical unions. In each case the former received significantly less resistance than the latter, as they did not constitute a fundamental threat to the developing economic system and rather worked within the assumptions of that system. The late 19th century and early 20th century is seen by a number of writers4, 8 as a critical period in US history where capitalist hegemony was established with the aid of employer’s associations to establish a united class position and a supportive state. The ongoing development of labour unions and worker movements into instruments of social change was retarded to a degree not seen in other countries. As Voss puts it, organized capital took on organized labor and won a lasting victory4. The result of this has been the “American Exceptionalism”4 where there has been no major worker or populist based political or social movement to offset the power of capitalist organizations and the state (which sided with capital during state interventions), allowing a much freer rein to capital and its supportive state. As Archer puts it “American political institutions appear distinctive, not because of the precocious commitment to democracy that they embodied, but rather, because of the extensive use of state repression  … judicial rulings, and police and military repression made it difficult or impossible for some groups to maintain organizations that could pursue their interests”8. Zinn also notes that “it was clear by 1896 that the state stood ready to crush labor strikes, by the law if possible, by force if necessary”6. The result is an institutional setting which is much less promising for changes to the status quo than others, and where the status of cooperatives meet the limited survival possibility proposed by Zamagni, as “an alternative form of enterprise, but one that operates in restricted sectors or pockets of the market, resembling an archipelago of co-operative islands set in a sea of capitalism”9.

The clash between industrial capitalism based wage labour and the previous more independent modes of production that played out in the United States was also taking place in the United Kingdom at the same time. As Restakis describes the position of the weavers in Lancashire, “One was the rising swell of industrial laissez faire capitalism … The other was the disappearance of an ancient way of life that was characterized by the artisan tradition and the weaver communities this tradition had woven”9. As with their U.S. counterparts they, “envisioned a mutually supportive community of independent small producers, exchanging their products without the manipulation of middlemen, free of the control of masters”9. The “Rochdale Model” that resulted though, unlike many of the early U.S. attempts at cooperatives, did not challenge the capitalist system and avoided questions of political power. Instead it operated within the constraints of the capitalist system, through such things as charging market prices and hiring wage-labourers (being predominantly consumer rather than worker cooperatives) in the same way as capitalist organizations. These characteristics allowed the cooperative movement in the UK, and those using this model in other countries, to survive and thrive. The limitations of these characteristics have been carried into the present with large cooperative and mutual enterprises such as the Cooperative Bank and the Nationwide Building Society being nearly indistinguishable from their private sector competitors. As Burton states “Co-operative Bank and mutually-owned building societies do not challenge the money system in any way. They are creating money out of nothing in the issuing of loans, and they are charging interest on loans and paying interest on deposits”10. This lack of difference to private sector financial institutions led members to act more like shareholders in many cases when offered the realization of the value of their membership through demutualization, as in the case of significant mutual entities such as with the Halifax Building Society in the UK, and the Manulife Insurance Company and Saskatchewan Wheat Pool in Canada (the Canadian government is also now looking at ways of demutualizing Property & Casualty Insurers, and credit unions11). Such demutualization can be very appealing to the current members or policy holders as they gain access to the capital built by both current and previous members and policy holders.  In an era of reasserted primitive accumulation through enclosure, such moves can be seen as the capitalist system opening up the common’s created by cooperative and mutual enterprises to profit making, in the same way that privatization has been used to cut loose profit-making opportunities from the state provided commons. These recent trends show the fundamental shortcoming of co-operative and mutual enterprises operating within the capitalist context without supporting social and political movements, as this leaves their continuing existence at the mercy of capitalist and state decisions.

A contrast to this is the region of Emilia-Romagna in Italy, “the world’s most successful and sophisticated co-operative economy”and represents a rare example of “the co-operative model migrating out of the co-operative movement to shape the organization and operating mechanics of the surrounding capitalist economy”9. The region underwent the conversion from highly mutualistic and cooperative social relations to wage-labour based relations in the early twentieth century as commercial and industrialized agriculture superseded earlier forms of economic organization. The response was the same as in other countries, with the establishment of worker federations, revolutionary movements, and cooperatives. In this case though, the cooperatives remained as an integrated part of an overarching revolutionary struggle, which included the resistance to fascism during the inter-war years and WW2. In the post-WW2 period cooperative associations were a significant element in the movement for land reform in Emilia-Romagna, working in unison with the Italian Communist Party (PCI) and the largest union in the area. Both the cooperative movement and the communist party had a very high level of prestige in the post-war period as they had been at the forefront of resistance to the Mussolini fascists and their German supporters, with the rights of cooperatives included in the post-war constitution that established Italy as a republic (replacing the previous monarchy). A significant part of the capitalist and other previously politically dominant sectors were also tainted by their cooperation with the fascist state. This mixture of influences created a positive eco-system within which co-operatives could develop their abilities and establish supportive organizations and other networks. Examples are the cooperative consortia (facilitated by Italian law, unlike in many other countries) set up to provide capabilities beyond the capacity of individual cooperatives, and the clustering of related small firms which provided synergistic benefits. The establishment of regional governments in Italy in the 1970’s was also a major element in the acceleration of the development of the cooperative sector in Emilia-Romagna, with the resulting procession of regional Communist or Communist coalition governments. These were highly supportive of the cooperative model and utilized the power of the local state to facilitate the acceleration of the development of the cooperative economic model as the hegemonic one within the region. The end result is that private companies work within the framework of a socialized capitalist regional economy, rather than the cooperatives working within a traditionally capitalist regional economy. The Emilia-Romagna example was established within an economic and social milieu which was fundamentally different to those in the United States and United Kingdom, with a highly supportive environment sustained over many decades. Restakis9 notes that the move of Italy to the right in the 1980’s has reduced this supportive environment, with neo-liberal policies being implemented that reduce the role of the state, and redirecting public funds towards private businesses. Whether or not the cooperative sector of the regional economy has reached a state of maturity and strength where it can continue to prosper without significant pieces of its supporting social infrastructure remains to be seen. The more recent developments within Italy, during the European Sovereign Debt Crisis, may either further impede progress, or reinvigorate social supports, depending upon the reactions of the Italian state and populace.

Another contrasting example is that of the Mondragon cooperative in the Basque region of Spain. Like the Emelia-Romagna example, the Mondragon success rests upon some very specific political and economic foundations. The Basque region has a national identity, built up over centuries of struggle for self-rule, and a low level of population mobility. The Basques also sided with the Republican forces, which utilized extensive local and regional citizen committees, during the Spanish civil war and the site of the infamous Guernica bombing was a prominent Basque town12. As with the examples above, a long history of cooperative enterprises dating back to medieval guilds had been ended by industrial capitalismand the majority of firms were foreign-owned13. The Mondragon cooperatives were founded by a Catholic priest, within the heavily devout Basque region, after more than 10 years of social discussion and other initiatives to help the local community. The setting up of a People’s Savings Bank was a critical development in the ongoing success of the co-operatives, as it provided a secure source of capital unavailable from other sources. The early growth was also facilitated by the high Spanish import tariffs which lasted until 1992, together with nationalist sentiments to buy local goods12. Over time the Mondragon co-op has grown to embody 256 enterprises with 83,859 workers and US$20 billion in annual revenues14.

Many of the same environmental drivers can be seen in the success of the cooperative movements in Quebec, Canada, which is a North American French speaking enclave of only 7.5 million surrounded by a predominantly English speaking population of over 300 million in Canada and the United States, and has a view of itself as a nation. Like the Basque region, Quebec has repeatedly pushed for greater autonomy and even independence. These factors lead to a large degree of social and political cohesion. In addition, given its French heritage, Quebec society sees France and Europe in general as a source for many of its ideas, such as cooperative movement and the positive role of government, to a much greater extent than other parts of North America. These factors have supported the growth of a large cooperative movement, which has been actively supported by the provincial government. The Desjardins cooperative financial group was founded at the start of the twentieth century, as a reaction to restrictive and punitive credit practices for small farmers and workers, based upon the examples of such institutions in Europe. The Cooperative Federee was founded in 1922 as an agricultural cooperative federation to consolidate the power of a number of cooperatives, and has received support from the provincial government including financial aid during the 1930’s to allow it to survive. It has now grown to cover over 100 cooperatives with 51,000 members. Such government support for cooperatives has been repeated many times, as in the case of the Maple Syrup Producers Cooperative, where the government was instrumental in its establishment15. The Agropur dairy cooperative was founded in the 1930’s as a response to the difficult economic conditions, together with supplier and merchant concentration16, and is now owned by the over 3,000 dairy farmers that it supports. Rapid expansion of the cooperative sector in Quebec was also facilitated by the provincial government after the “Quiet Revolution” in then 1960’s, which focused government action and support on the development of the local economy. This involved support for the cooperative sector, the nationalization of the major power utility (Hydro-Quebec) and the establishment of major publicly owned financial institutions such as the Caisse de Depot which manages public pension and insurance plans (very much like the Caisse des Dépôts et Consignations established in France in 1816). The Caisse has been described as “an instrument of growth, the most powerful economic lever ever seen in the province17”, and has been investing in Quebec companies since the 1970’s. The Caisse d’economie Desjardins Travailleuses et des travailleurs (the CETT), was formed by the Quebec National Federation of Trade Unions (the CSN) in 1971, to allow “the funding of collective and cooperative projects aimed to improve worker’s living conditions and to contribute … to a fair growth of Quebec”18, and became part of the Desjardins cooperative network. In the post “Revolution” period, Desjardin has grown rapidly into a highly diversified financial cooperative with 5.8 million members, 43,000 employees, and C$196 billion in assets. As Diamantopoulos notes, the concentration of highly successful cooperatives in Quebec, together with a supportive and active government sector, led to a self-sustaining ecology which may be unique. “An expanding leading group thus reinforced overall sector expansion by providing policy-leverage, resources, openness, and enthusiasm to new movement challenges. In Gramscian terms, the success of Québec’s leading cooperative brands built the moral and intellectual authority of the cooperative alternative and its capacity for further expansion. It helped provide solid foundations for an historical bloc ‘from above’, framed by the wider social movement resurgence of the social economy ‘from below’. In large part, co-operation forged a resurgent hegemony in the economic and social life of twenty-first century Québec by leveraging established sector strengths.2” Quebec is an example of the kind of diversified financial system proposed by the New Economics Foundation where state, private, and cooperative entities operate within a supportive environment which values diversity18. Of all the examples it is certainly the one closest to the most positive possibility for cooperatives put forward by Zamagni where “the cooperative model will eventually increase its power and influence and will in time come to displace the capitalist enterprise as the primary engine of economic activity”9, especially if we combine the weight of state enterprises and the cooperative sector to represent the non-capitalist economy. Diamantopoulos contrasts the case of Quebec where the cooperative sector has continued to flourish in the post-1980 neo-liberal era, with that of Saskatchewan where the same supporting ecology was not in place and the cooperative sector has withered2.

References

1. Diamantopoulos, Mitch (2011), Cooperative Development Gap in Québec and Saskatchewan 1980 to 2010: A Tale of Two Movements, Canadian Journal of Non-Profit and Social Economy Research Volume 2, Number 2, Fall 2011. Accessed September 11th, 2012 at http://www.anserj.ca/index.php/cjnser/article/viewFile/85/28

2. Curl, John (2009), For All the People: Uncovering the Hidden History of Cooperation, Cooperative Movements, and Communism in America, PM Press

3. Jalil, Andrew (2009), A NEW HISTORY OF BANKING PANICS IN THE UNITED STATES, 1825-1929: CONSTRUCTION AND IMPLICATIONS, Reed College. Accessed September 9th, 2012, at http://academic.reed.edu/economics/jalil/ANewHistoryOfBankingPanicsintheUnitedStates.pdf

4. Voss, Kim (1993), The Making Of American Exceptionalism: The Knights of Labor and Class Formation in the Nineteenth Century, Cornell University Press

5. Cohn, Raymond (2010), Immigration to the United States, EH.Net, Accessed September 9th, 2012,  at http://eh.net/encyclopedia/article/cohn.immigration.us

6. Zinn, Howard (1980), A People’s History of the United States, Harper & Row

7. Rayback, Joseph (1966), A History of American Labor, Free Press

8. Archer, Robin (2008), Why is There No Labor Party in the United States?, Princeton University Press

9. Restakis, John (2010), Humanizing the Economy: Co-operatives in the Age of Capital, New Society Publishers

10. Burton, Mark (2008), Unravelling Debt The Economy, Banking and the Case of JAK (MSc Dissertation in Holistic Science at Schumacher College & University of Plymouth), JAK Bank. Accessed September 17th, 2012, at http://www.jak.se/sites/default/files/folkbildning/dokument/MARK_BURTON_DISSERTATION_2.pdf

11. Clark, Stephen et al. (2011), New Proposed Regulations for Federal Credit Unions – A Step Closer to a Federal Regime, Osler. Accessed September 10th, 2012 at http://www.osler.com/NewsResources/New-Proposed-Regulations-for-Federal-Credit-Unions-A-Step-Closer-to-a-Federal-Regime/

 

12. Azzellini, Dario (2011), Ours to Master and Own: From the Commune to the Present, Haymarket Books

13. Jones, Kevin (2000), Mondragon Basque co-op, Thirdway Think-Tank. Accessed September 10th, 2012 at http://thirdway.eu/2008/01/31/mondragon-basque-co-op/

14. Lewis, Michael & Conaty, Pat (2012), The Resilience Imperative, New Society Publishers

15. Citadel Maple Syrup Producers Cooperative web site. Accessed September 10th, 2012 at http://www.citadelle-camp.coop/maple-syrup/The-Cooperative/History/1925—1950.aspx

16. Agropur web site. Accessed September 10th, 2012, at http://www.agropur.com/en/profile/history/

17. N/A (N/A), History of the Caisse, Caisse de depot. Accessed September 10th, 2012 at http://www.lacaisse.com/en/about-us/history

18. N/A (2009), The Ecology of Finance: An alternative white paper on banking and financial sector reform, New Economics Forum. Accessed September 10th, 2012, at http://www.neweconomics.org/publications/ecology-finance

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