This article was originally written for Issue 14 of STIR, the magazine for the new economy and was also published online at Co-operatives UK What if…? blog that fed into the UK National Co-operative Development Strategy. I recently noticed that blog has since gone offline and so have re-posted the article here so I’m able to share it with people.
The first in a four-part series looking at 1) the scale and success of co-ops funding co-ops internationally, 2) existing examples and recent developments in the UK, 3) how platform co-ops empowered by open source tools could rapidly scale these models, and 4) how to spend £70 million a year.
Co-ops in the UK turnover £35 billion a year but rely on £333k a year from the Co-operative Bank to fund co-op development. This needs change if we’re to navigate the perfect storm of climate, energy and economic uncertainty and accelerate the transition to a fair economy that thrives within planetary boundaries. Justice demands it. Our shared future depends on it. How might we do it?
- Embracing co-operative excellence
- Practicing co-operation among co-operatives
- Being open to innovation
To me, “Back to Being Co-op” starts with rediscovering the practical solidarity and bold ambitions of the Rochdale Pioneers. These 28 weavers, cloggers, shoemakers, joiners and cabinet makers each pooled 2 pence a week (about 50p a week today) and built up enough capital to open a shop. But it was way more than just a shop. Their 1844 rule book states:
“That as soon as practicable the Society shall proceed to arrange the powers of production, distribution, education and government” — Rochdale Piooners Rule Book, 1844
They also encoded cooperative best practice into a set of principles that evolved to become the internationally recognised guidelines by which co-operatives put their values into practice.
The 5th principle is: Education, Training and Information:
“Co-operatives provide education and training for their members, elected representatives, managers, and employees so they can contribute effectively to the development of their co-operatives. They inform the general public – particularly young people and opinion leaders – about the nature and benefits of co-operation.”
This is surely where “embracing co-operative excellence” must begin. But how to finance it? Enter principle 6: “co-operation among co-operatives”. This has been a co-op principle since at least 1966, but large networks of co-ops systematically pooling resources are virtually non-existent in the UK. As a result the UK’s 7000 co-ops and 17.5 million members are punching massively below their weight.
What could be achieved in the UK if this changed?
In 1991 Italy passed Law 381/91 which created two types of multi-stakeholder “social co-operative”: 1) social, health and educational co-ops, and 2) co-ops who employ disadvantaged people. Today 14,000 social co-ops serve over 5m people, employ more than 400k and turnover €9 billion a year. Social co-ops invest 3% of their annual income in the “Marconi Fund” to finance new co-ops. I’ve not yet found any detailed info about the size and operation of the Marconi Fund, but 3% of €9 billion is €270,000,000.
Spain’s Mondragón Corporación Cooperativa (MCC) is probably the best known cooperative network in the world. Starting life as a small vocational school in 1943 the first Mondragon Co-op made up of five of its students was founded in 1956. It is now complex network of 289 business (of which 110 are co-ops), has a turnover of over €14 billion and provides a livelihood for over 80,000 people (at present just under one third of these are owner-members but this is due to rise to over 75% in the next 3 years). They have their own bank, 15 technology centres and a university. Wages ratios between the highest and lowest paid members are democratically agreed upon and average 5:1 with low paid workers earning on average 13% more than they would elsewhere. Individual co-ops are federated into four sector-wide co-ops: Industry, Knowledge, Finance and Retail. Member co-ops contribute between 15-40% of their profits to these sector co-ops in order to fund joint marketing, branding, and research projects etc. These contributions also help smooth out and share the losses and gains made by individual co-ops – losses made by one co-op can be partially offset (up to 40%) against profits from another. 10% of sector profits are paid to MCC Investments to fund co-operative development. In addition to this, individual co-ops contribute 10% of their profits to the MCC Foundation, 2% into an education fund and 2% into a solidarity fund. About £20 million a year is invested in educational and social projects alone.
Japan’s Seikatsu Club Consumers’ Co-operative Union began in 1965 when a group of housewives organised a collective buying club to purchase quality milk at affordable prices, one of the earliest examples of Community Supported Agriculture. Seikatsu is now an association of 30 consumer co-ops, employs about 1300 people and has over 300,000 members organised into 200 independently managed branches across Japan. Members contribute 1000 yen (about £7.50) a month, and also invest substantial sums in the association. In 2010 the accumulated contributions of the members was roughly £220 million, an average investment of about £750 per member.
The Arizmendi Association of Cooperatives is a Californian cooperative network made up of seven member businesses: six cooperative bakeries and a co-op development and support collective. The first business The Cheese Board opened as a small cheese store in 1967. In 1971, the two original owners sold their business to their employees and created a 100% worker owned business of which they remained a part. In 1995 the Cheese Board funded the Association’s part-time staff who then helped to create 5 more bakeries all named “Arizmendi” after Arizmendiarrieta (the founder of Mondragon). Together they have about 100 worker owners. The co-ops share a common mission, share ongoing accounting, legal, educational and other support services, and support the development of new member cooperatives by the Association by pooling the lower of 4% revenue or 25% of profit. Older more established co-ops pay the equivalent of 1 full time wage per 20 full time equivalent members.
Founded in 2005, The Valley Alliance of Worker Co-operatives (VAWC) is dedicated to building a sustainable local economy by facilitating the growth and development of worker cooperatives in the Connecticut River Valley of Western Massachusetts and Southern Vermont. Their 9 member co-ops include 6 businesses who converted into co-ops, have a combined annual revenue of $7.2 million. Members pay dues of 1/8 of 1% (i.e. 0.00125%) of their revenue to cover the association’s operating expenses and pool 5% of their profits into a co-operative development fund. If the UK’s 7000 co-ops pooled the same amount of revenue and profit as VAWC members it’d generate about £70 million a year.