Friday, February 22, 2019

Co-Ops for Economic and Community Development

Stephanie Allen, Project Assistant

Although they have been around for nearly two centuries, cooperative businesses (co-ops) have never really attracted much attention from economic developers. That may soon change.

Business start-ups are at an all-time low. Income inequality is at a high. And, we are still reeling from the effects of the unbridled, investor-driven, socially irresponsible capitalism that led to the great recession. Co-ops offer an interesting and more socially responsible alternative to shareholder- and proprietor-owned business structures. Economic developers take note.

The Urban Institute lists co-ops among their “Five trends to watch in community and economic development in 2019.” They predict that there will be more policy and philanthropic interest in co-ops, especially worker co-ops in 2019.

So, what exactly is a co-op (aside from an alternative grocery store)? And, what’s so interesting about them from a community and economic development standpoint?

A co-op is a democratically run business whose members are also its owners. Co-ops exist to serve the needs of their members (rather than to maximize profit) and each member has a say in the business decisions the co-op makes. Member-owners answer to one another, not to outside investors. And, they return surplus revenue to one another too instead of rewarding outside investors with their profits. The co-op philosophy is a community approach to business where they are built by the community and for the purpose of serving the community.

Most of us are familiar with grocery co-ops, many of which started as buying clubs that allowed members to pool their resources in order to place bulk orders and save money. Credit unions are also based on a co-op model. Co-ops run many resident-owned buildings in large cities and are becoming more popular in mobile home parks as well. There are worker co-ops, agricultural marketing co-ops, insurance co-ops, utility co-ops, childcare co-ops, and dairy co-ops, just to name a few. A 2010 study conducted by the University of Wisconsin found that there were some 29,000 co-ops in all sectors of the American economy, their revenues exceeded $3 trillion, and they employed more than 850,000 people.

Economic and community development agencies should be interested in co-ops for a number of reasons, including the following:

  • Co-ops pool human, financial, and other resources, extending the opportunity of entrepreneurship to those without the capital or resources to start a new business alone.
  • Co-ops spread the wealth by providing jobs and business ownership opportunities to community members. According to a 2008 study from the University of Wisconsin Center for Cooperatives, owning a business is a way for workers to build personal assets, which can lead to higher income, higher educational attainment, and other positive social outcomes.
  • Co-ops can reduce income inequality. According to a report from co-operatives UK, worker co-ops have narrower pay differentials between executive and non-executive workers, leading to reduced income inequality.
  • Co-ops are resilient. According to a 2012 CICOPA study, co-ops had fewer closures and fewer job losses than non-co-ops during the great recession.
  • Co-ops recirculate resources in the community
    Co-ops exist to meet members’ needs, not to deliver profits to outside investors. Their nature is inherently locally-based and participatory, which makes them well-positioned to contribute directly to community vitality and stability. And, that’s the ultimate goal for community and economic development isn’t it? We want vital and stable communities.