Cooperative Economics: Promises and Challenges

Corporación Mondragón en el País Vasco
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  • Roar Bjonnes is the co-founder of Systems Change Alliance, a long-time environmental activist and a writer on ecology and alternative economics, which he terms eco-economics.

The contemporary corporation is primarily driven by the pursuit of short-term profits for its shareholders. In contrast, cooperative companies tend to adopt a more holistic perspective on business operations. Numerous studies have demonstrated that cooperative owners prioritize considerations such as long-term employment, working conditions, environmental impact, and the sustainability of their local communities. This heightened focus on broader societal aspects suggests that when ownership and power reside with the workforce, business decisions become more balanced and forward-thinking.

Adam Smith, often regarded as the father of capitalism, underscored a fundamental contradiction within capitalism. He noted that the interests of factory owners conflict with those of society, while the interests of laborers align with societal well-being. The cooperative movement contends that when workers assume ownership, this dichotomy diminishes, if not disappears.

Cooperative enterprises are more prevalent than commonly acknowledged, encompassing worker-owned industries, banks, farmers’ markets, local work-exchange programs, agricultural processing plants, service projects, and health clinics worldwide. Approximately 15 percent of the global population, or around one billion people, are members of some form of cooperative. The turnover of cooperatives in the ten largest economies constitutes 5 percent of the GDP, slightly smaller than Italy’s GDP, the world’s seventh-largest economy.

In Europe, cooperatives directly employ 4.7 million individuals, with twenty countries boasting networks of cooperative banks that outperformed commercial banks during the last economic crisis. Notably, 1478 cooperative banks and businesses across forty-six countries reported turnovers exceeding $100 million each. The Mondragon cooperative, established in Spain’s Basque region in 1959, stands out as one of the most successful, comprising 256 enterprises and employing nearly 74,000 workers. Economist Jaroslav Vanek asserts that these “democratic firms” outperform capitalist enterprises, particularly in economically underdeveloped regions.

Vanek advocates for the efficiency of coops as workplaces, emphasizing mutual supervision and increased capital productivity. Beyond efficiency, cooperatives foster solidarity and a sense of individual worth, contributing to a balanced use of resources and environmental benefits.

In Canada, cooperatively run hospitals are known to provide better and more cost-effective healthcare, showcasing the positive impact of the cooperative spirit on worker dedication and patient care. Contrary to concerns, cooperatives can coexist within a capitalist environment and often prove more efficient and flexible. Their ability to prioritize objectives beyond profit maximization allows for innovative responses to economic challenges, such as reducing working hours instead of layoffs.

However, challenges persist when operating cooperatives within a capitalist economy, particularly in competing globally. Cooperative economists, including Vanek, emphasize that coops are better suited to support decentralized or local economies.

Examining the Mondragon cooperative as a case study reveals both successes and challenges. Mondragon’s success lies in its size and diversified interests, maintaining jobs through solidarity and equitable distribution of surplus. However, global expansion has presented challenges, including the bankruptcy of subsidiaries, raising questions about working conditions and cooperative principles.

In summary, the Mondragon cooperative serves as a valuable case study, offering insights into the complexities, successes, and challenges associated with worker-owned cooperatives. The examination sheds light on issues related to class, power dynamics, and the broader implications for social, environmental, and labor movements.

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  • Roar Bjonnes is the co-founder of Systems Change Alliance, a long-time environmental activist and a writer on ecology and alternative economics, which he terms eco-economics.

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