Cooperative businesses provide a new-old model for job growth

Co-ops worldwide represent much more than hippie grocery stores: They're a fast-growing way to do business better in fields from finance to agriculture to industry.

What do coffee growers in Ethiopia, hardware store owners in America, and Basque entrepreneurs have in common? For one thing, many of them belong to cooperatives. By pooling their money and resources, and voting democratically on how those resources will be used, they can compete in business and reinvest the benefits in their communities.

The United Nations has named 2012 as the International Year of Cooperatives, and indeed, co-ops seem poised to become a dominant business model around the world. Today, nearly 1 billion people worldwide are cooperative member-owners. That’s one in five adults over 15 – and it could soon be you.

Why cooperatives?

Cooperatives have been around in one form or another throughout human history, but modern models began popping up about 150 years ago. Today’s co-ops are collaboratively owned by their members, who also control the enterprise collaboratively by democratic vote. This means that decisions made in cooperatives are balanced between the pursuit of profit and the needs of members and their communities. Most co-ops also follow the Seven Cooperative Principles, a unique set of guidelines that help maintain their member-driven nature.

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From their beginnings in England, cooperatives have spread throughout the world. In Ethiopia, cooperation helps women and men rise above poverty. In Germany, half of renewable energy is owned by citizens. In America, 93 million credit union member-owners control $920 billion in assets. In Japan, a sixth of the population belongs to a consumer co-op. And in Basque Country, a 50-year-old worker co-op has grown to become a multinational, cooperative corporation.

If a “multinational cooperative corporation” sounds strange to you, you’re not alone. The past century’s multinational corporations, in most cases, were anything but cooperative. During the 19th and 20th centuries, the business landscape was dominated by large, private corporations controlled by a small number of people; those corporations tended to pursue profit without consideration for people, the environment, and in many cases, ethics.

While 20th-century corporations were good at making money, the 21st century finds humanity in need of new business models that value sustainable growth and community benefit. The UN stands behind cooperative models, and in 2012 will dedicate its efforts to raising awareness of co-ops, helping them grow and influencing governments to support them legislatively.

Raising cooperative awareness

Cooperatives are more widespread than you might think. From banks and credit unions to apartment buildings to worker-owned businesses, co-ops appear in every facet of today’s economy. In most cases, they formed in response to economic crises like the Great Depression, or to let small groups compete in monopolized markets. In 2012, both of those conditions exist – and unsurprisingly, so do cooperatives.

Far from being limited to grocery stores, modern American co-ops also include agricultural marketing groups like Land O’Lakes and Florida’s Natural; retail outlets like R.E.I.; electrical utilities in the Southeast; housing cooperatives in New York; credit unions; and countless local farm-to-store programs. Purchasing co-ops like ACE, True Value Hardware, and Carpet One let independent stores compete with chain outlets.

Yet, in many cases, Americans don’t think of these well-known brands as cooperatives. In fact, the United States is full of co-ops – around 30,000 of them with nearly 900,000 members. Thirty percent of Americans belong to cooperatively owned credit unions, the largest of which serves 3.4 million Department of Defense employees and has $45 billion in assets. In 2004, the 10 largest co-ops in America earned over $12 billion in revenues.

If you knew how many successful cooperatives surrounded you, and what a positive impact cooperative enterprise can have on the world, would you be more likely to join or start your own co-op? The UN believes you might. This is one of the primary goals of both the UN and the International Cooperative Alliance: to make you aware of the cooperatives in your own backyard, as well as their potential to influence your life and future.

“Cooperatives, in their various forms, promote the fullest possible participation in the economic and social development of all people, including women, youth, older persons, persons with disabilities and indigenous peoples, are becoming a major factor of economic and social development and contribute to the eradication of poverty,” says UN Resolution 64/136, 2010.

The UN officially launched the Year of the Cooperative campaign in October 2011. The preparations continued in November, when the International Cooperative Association held a General Assembly in Cancun, Mexico. There, Mexican President Felipe Calderón hailed co-ops as “a great opportunity” to create jobs and help Mexico recover from the economic crisis.

Cooperative-related events will continue throughout 2012, highlighted by two major summits in Venice, Italy, and Quebec City, Canada. Meanwhile, individual countries and independent groups will throw events, publish new research, and celebrate the possibilities cooperation brings to a 21st-century world economy.

Promoting cooperative growth

In the developing world, cooperatives often function as building blocks for stronger, more stable economies. One of the most fertile breeding grounds for co-ops has been sub-Saharan Africa. Since the economy was liberalized in the 1990s, Africa has entered a renaissance of cooperative enterprise.

Most of these cooperatives start small. Poverty in Africa is still high, and, as in many parts of the world, women and older or younger people have traditionally received much lower wages for their work. A cooperative like the coffee growers’ group at Indido in Ethiopia allows all workers to receive equal wages while selling their coffee at better market rates.

In Kenya, cooperative banks and credit unions are revolutionizing the economy, making small loans available to farmers and growers at affordable rates. But the cooperative model is still controversial. During the global economic downturn that followed 2008’s food shortages, co-ops were forced to cut back on the number of loans they offered to members, while taking infusions of cash from external sources.

In 2012, the UN will focus on how cooperatives can grow and thrive. The trend is well-established: The cooperative model is expected to be the world’s fastest-growing business model by 2025. However, there are still some inconsistencies holding co-ops back. In many cases, cooperative models are still under development and each company must come up with its own self-sustaining plan.

Dr. Joni Carley, a values-driven leadership expert, believes that the cooperative model’s perceived newness is one of its greatest challenges to widespread adoption.

“While cooperation is really our oldest model of work, it feels brand new, and we don't have the systems down yet. It also usually takes much longer than anyone thinks it should to make some decisions, to develop infrastructure, and to create the kind of cooperative alignments that serve for the long haul ... Although we now have some excellent tools to quantify culture, few leaders understand the value of deploying those tools and few see themselves as able to devote the time and attention required.”

In other cases, a lack of regulation and legislative support can undermine co-ops. During the recent crisis in Africa, pyramid schemes in the Savings and Credit Cooperatives led to a serious thinning out of available capital. With better regulation, that situation could have been avoided and the money kept inside the member-owner community it was intended for.

Developing cooperative legislation

One of the greatest cooperative success stories is that of Mondragón Corporation. Founded in 1956 by a Catholic priest in the autonomous Basque region of Spain, Mondragón (named after the town of Mondragón where it is based) began as a cooperative trade school and a group of five workers selling paraffin heaters.

Less than 50 years later, Mondragón is the world’s largest cooperative, and Spain’s seventh-largest business. A paragon of co-ops, Mondragón has operations in 19 countries and employs 83,000 worker-owners. Yet for every international job the company creates, it employs two people in Spain.

What has allowed Mondragón to grow steadily without abandoning its cooperative principles? For one thing, it has embraced innovation, and worker-owners have repeatedly chosen to reinvest in the future of the corporation. It's also based in the Basque community, known for its strength and cooperative nature.

Mondragón also got a head start with early support from the Spanish government. In the years after Franco, Spain created a framework of loans designed to help farmers and small businesses recover financially; meanwhile, the Spanish economy remained relatively insular, protecting the same businesses from external competition. Mondragón benefited from that governmental support, without governmental interference in the company's autonomy.

The UN’s third objective in 2012 is to influence governments and regulatory bodies to develop frameworks that will support cooperatives in their various forms. This can be a delicate procedure: One of the seven Cooperative Principles states that cooperatives can’t make agreements that would interfere with their autonomy and democratic control.

European nations, for the most part, have developed a system that supports cooperative business without interference. Canada has also been highly successful at fostering cooperative growth. But for many nations, co-ops can appear risky, regulation can be lacking – or, quite simply, the government may have an interest in controlling its citizens’ actions.

A cooperative future

UN Secretary General Ban-Ki Moon calls cooperatives “a unique and invaluable presence in today’s world. Cooperatives are a reminder to the international community that it is possible to pursue both economic viability and social responsibility.”

Nowhere is that statement more apt than in the United States, where cooperatives are etched into the public consciousness as hippie grocery stores.

According to Dr. Carley, this is a dangerous misconception: “Unfortunately, in the US, there is a highly vested interest in maintaining the mythology that values have to be compromised to make money and that they have no place in the workplace. What we know now is that when personal and organizational values are aligned, profits, share prices, stakeholder loyalty, innovation, and more go up.”

The UN's goal for the United States is to rebrand cooperatives – and it may get some help. In 2009, the United Steelworkers (USW), North America’s largest industrial trade union, announced a new affiliation with Mondragón. The goal: to help steelworkers purchase and run their own mills cooperatively, focusing on sustainable business and environmentally sound practices.

In 2000, poverty expert Barbara Peters visited the town of Mondragón. She labeled it a “town without poverty” – and also noted the absence of “extreme wealth.” Peters immediately made the connection between this small town in Spain’s industrial region and the suffering Rust Belt of North America. If the USW’s new plan succeeds, cooperatives may be able to reinvent faltering towns, even as they reinvent their own image for American workers.

Ultimately, the key to equal employment and fair wages may be as simple as taking control of our own economic realities, stepping up and sharing the responsibility for our future. The United Nations thinks you’d be a great boss – don’t you?

• Jessica Reeder is the cofounder and managing editor of Love and Trash, and a contributor to Burning Blog and Shareable.net, where this article originally appeared.

• This article was originally published at Sharable Magazine.

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