Seizing the Production of Means

Worker cooperatives are birthing a new world in the wreckage of a dying one.

December 5. 2016

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Seizing the Production of Means

Worker cooperatives are birthing a new world in the wreckage of a dying one.

In the wake of the 2008 global financial crash, a little-known but remarkably durable model of business began to quietly make waves in the United States: the worker cooperative. And even under the most right wing government of the century, the cooperative model might just offer a path for the left to fight back.

Democratically run and equally owned by everyone employed there, the worker co-op model claims to offer lasting solutions to some of the most pressing issues in America – especially inequality and environmental destruction – and, radically, it proposes to transform democracy from simply voting for representatives into a process weaved into the very fabric of daily life.

The USA has, as a society, been shuffling further and further to the left on key issues over the past 20 years: a majority now supports gay rights; nearly half now support access to abortion; three quarters of Americans want federal protections for transgender people; and nearly 70% want government to directly fight inequality and poverty.

These shifts are especially prominent among young people, leading a conservative poll of millennials to fret that “the hostility of young Americans to the underpinnings of the American economy and the American government should frighten every business and political leader”.

But workers of the world sadly have a lot more to lose than just their chains in the age of Trump. Far from ‘draining the swamp’, Trump’s anti-corruption campaign message vanished within days of his election victory as he appointed lobbyist after insider to key government posts. Combined with a legislative majority of a GOP that is already deeply corrupt, and with upcoming Supreme Court nominations that will cement court rulings into decades of reactionary jurisprudence, nobody can be in any doubt that the Trump era is out to inflict a whole lot of pain.

It is the last hurrah of America’s old guard as its empire sputters and falters. They know that someday soon there won’t be enough gerrymandering and voter suppression in the world to keep them from capitulating to a public that is increasingly hostile to the worldview of its leaders. And for now, the left has little actual institutional power, despite an increasing claim to the moral majority.

The cooperative movement offers a direct long-term solution for this imbalance of power. “If we want an economy that delivers democratic rather than plutocratic outcomes, we need to democratize the economy,” wrote Gar Alperovitz, an economist who co-founded the Democracy Collaborative. Formed in 2000 to act as a research center dedicated to this question of countervailing economic power, the Democracy Collaborative now finds itself in an advisory position for the growing list of city governments and institutions who are prepared to help bring this grassroots democratization about.

This goal of system change revolves around a notion that Alperovitz’s books have called ‘evolutionary reconstruction’ – on the one emphasizing building over revolt, on the other making it clear that no agenda of gradual reform will be enough to save workers struggling to make it in the cracked shell of the dying empire. The Democracy Collaborative works to “connect the emerging context of practice around community wealth building to the ‘system problem’—the design of forms of economic life rooted in sustainable communities and grounded in the best of the American tradition.”

Republic Windows and Doors was a factory in Chicago that closed in 2008. Bosses made the decision in isolation and didn’t give workers the required 60 day notice that their jobs were about to go – so the workforce occupied the factory, and refused to leave until they were back-paid the wages they were owed. They kept their jobs as new ownership assumed the reins.

Three years later the new owners tried to liquidate the business again. The workers occupied the factory again, but this time they had a new demand: that they take control of the business themselves. The result, open since 2013, is New Era Windows, a fully democratic, fully worker-owned cooperative business. With all the capital held by the people who operate it, New Era Windows is far more durable to economic shocks than a top-down firm with distant investors and shareholders – and it can also afford a better rate of pay than most competitors. One worker-owner told Yes Magazine: “we don’t have the CEO making millions of dollars, so we have the ability to compete with the industry.”

This is no boss-owned factory that Donald Trump is pretending to save, and it isn’t a tax dollar-funded corporate bonanza to hold jobs down for a couple more years – this is genuine long-term job protection, in which the bosses are phased out of existence and no longer allowed to extort the taxpayer for an increasingly shoddy deal.

It hasn’t always been easy to gather data for the cooperative sector in America, but as the model matures it is becoming easier to measure its growth. And growth has been good. There are thought to be more than 250 full worker cooperatives in the USA, but of that number 60% were founded after 2000 and a further 31% have begun operations since 2010 alone.

A study of American small businesses in 2013 found that cooperatives have an average profit margin of 6.4%, compared to a national profit margin of only 5.4%, making them more economically efficient than traditional capitalist firms. And because co-ops are built by communities rather than wealthy investors, the post-2000 wave of sector growth has been a particular boon to people of color, who make up 60% of worker-owners in new co-ops.

Many wonder aloud why such a powerful model is only coming to fruition now. Why not before? In truth, America has a long history of workers forming cooperatives – but it has an equally long history of these transformative enterprises being smashed by bankers and racists who know a threat to their power when they see one.

The first trade unions in America were funded by striking workers forming temporary co-ops to undercut their bosses, as far back as 1768. By 1794 it had evolved from a temporary strike measure to a business proposition when shoemakers in Baltimore founded the first cooperative factory in the United States.

And after the Civil War, blacklisted tailors founded the Knights of Labor, a workers’ organization that sought to unite black and white workers into one union. The Knights wanted to bring democratic modes of production from the cities of the east coast to the huge rural industries forming in the Mid West and beyond. At the height of their power, the Knights of Labor had between 750,000 and one million members, with roughly 200 cooperatives funding and supporting one another to give workers a better life. It was the Knights who famously defeated the Union Pacific Railroad through coordinated strikes and demonstrations.

The small union co-ops of the Knights of Labor had amassed enough capital by 1883 to invest in a new coal mine in Illinois, their first major production cooperative. But canny Wall Street industrialists, who were at that time expanding their railroads into the American heartland, discovered that they could crush this competition by refusing to let the Knights (and many other co-ops) use the railroads. Banks also made it nearly impossible for cooperatives to have loans or credit, and used their overwhelming leverage to freeze them out of markets.

The model only failed because it was intentionally and ruthlessly smashed by Wall Street.

During the Jim Crow era’s violent degradation and economic marginalization of African Americans, many black communities depended on co-ops to sustain and elevate themselves. William Du Bois himself told a conference in 1907: “we unwittingly stand at the crossroads—should we go the way of capitalism and try to become individually rich as capitalists, or should we go the way of cooperatives and economic cooperation where we and our whole community could be rich together?” Du Bois conducted a study that year which identified 154 black co-ops nationwide – within a rich ecosystem of thousands more mutual aid societies owned by African Americans.

The historian Jessica Gordon Nembhard recently published her findings on this hidden history. A largely forgotten brutality in America’s co-op wrecking past, Nembhard points out, is that many burnings and lynchings by white supremacists intentionally targeted black co-ops in particular, hating their success. State governments would also routinely attack worker-owners with fabricated fraud charges and deport or imprison them, to neutralize their threat to white hegemony in America.

Similar to these American efforts at self-liberation, many European worker cooperatives in the past two centuries have emerged as specific responses to political oppression.

Italy’s northern region of Emilia-Romagna has a powerful cooperative sector that now controls more than 1/3 of the region’s industry, but originally this was built by socialists from the late 19th century onward with an explicit humanitarian vision of social transformation. And in 1930s Spain, during their civil war, hundreds of thousands of agrarian workers formed cooperatives in the Aragon region that thrived until the fascist regime of General Franco destroyed them – with direct military support from Mussolini and Hitler.

But the biggest cooperative in the world was built right under the nose of Franco’s regime. The Mondragon Corporation is now Spain’s 10th largest company, employing over 74,000 worker-owners across 257 different businesses, all of which are democratically run and owned by the workers. Mondragon was founded in the Basque region in 1956, when trade unions were outlawed, and so it was carefully constructed to provide work and empowerment to the Basque people without arousing violent repression from the fascist government.

Since Spain’s return to democracy in 1975, Mondragon has grown into a powerful hub of working class agency in northern Spain. They now have their own university, hospital, bank, and many other amenities that can’t be destroyed by austerity nearly as easily as equivalent institutions across crisis-wracked Europe. The region in which Mondragon mainly operates has had a far easier time than the rest of Spain in the country’s ongoing post-2008 economic slump.

21st century America’s cooperative renaissance has occurred in the context of its own adversarial forces – foreclosure, racism, environmental destruction, and police brutality to name a few. But these are not as openly menacing (yet) as the authoritarian conditions under which the model has historically been able to survive. As a result, the movement has had something of a head start this time around, and there are several cases in which the model has already been implemented with remarkable success.

Cleveland leads the way with its famous Evergreen Cooperatives. Decades of deindustrialization in Rust Belt cities like Cleveland has created soaring unemployment and poverty rates, and the city government found that the old model of bribing corporations to stay with temporary tax breaks was an unsustainable crutch.

City of Cleveland officials therefore decided to try a new regeneration strategy. “Rather than a trickle-down strategy,” the Evergreen website explains, there is a better solution in “economic inclusion and building a local economy from the ground up.” The administration drew their inspiration from Mondragon, and kick-started it with several million dollars of city funds. By 2009, the first two profitable components (a laundry and a solar energy provider) were up and running, in the hands of worker-owners drawn from the city’s most deprived neighborhoods.

The university and hospitals in Cleveland have a combined purchasing power of $3 billion – why not, they thought, have these government institutions spend some of that money buying products directly from a renewed and muscular middle class in the city itself? These are referred to as ‘anchor institutions’, and since they’re already funded by Cleveland tax dollars it is intended for the city’s expenditure not to rise by purchasing Evergreen products.

As of late 2016 there are four active Evergreen co-ops, a portion of whose profits contribute to a fund designed to invest in new institutions that will also be built into to its democratic ecosystem.

Evergreen are actively advised by ambassadors from Mondragon, they have union backing from the United Steel Workers, and they have strong research links with the Democracy Collaborative. They have been so successful in their short history that it is referred to more widely as ‘the Cleveland Model’, which is now being enthusiastically assessed by more than ten other major cities. Taxpayer funding for co-ops by city governments is becoming an increasingly popular solution, already implemented in New York, Minneapolis and Madison, WI.

But in parts of America where reactionary or miserly administrations are reluctant to support or even outright hostile to co-ops, groups organizing to grow the model have an uphill battle to establish themselves as an economic force.

Only a handful of states have a dedicated legal structure for cooperatives, making it a matter of considerable bureaucratic difficulty to form one in states lacking the right legislation. Most major banks’ lending policies are unfamiliar with cooperatives, making them reluctant to lend to democratic start-ups. Suffocating rent and lease costs in major cities make it almost impossible to get started for any business not endorsed and lent to by banks. Self-sufficient cooperatives would be of little use to a capitalist bank anyway, since it can’t control them for long-term profit.

And some members of the movement complain that Ronald Reagan’s government actively stifled community investment: a federal regulation dating back to that administration effectively blocks credit unions from financing new businesses – including cooperatives. Since credit unions in the US own collective assets worth more than $1 trillion, belonging to over 6 million citizens, this would amount to a huge potential investment pool if only they weren’t forced by the federal government into being unable to compete with Wall Street.

Starved of that capital for so many years, co-ops are finally beginning to amass the money required to do something about it: create their own banks.

Most of the San Francisco Bay Area’s worker cooperatives loosely collaborate as the 35 member businesses of the Network of Bay Area Worker Cooperatives (NoBAWC, pronounced ‘no-boss’). Seven of these NoBAWC members make up the highly successful Arizmendi bakeries, named after Mondragon’s founder. The Arizmendi bakeries operate all over the Bay Area and, similar to Evergreen, finance one another with a revolving fund. But unlike Evergreen, they were founded without any state assistance.

The Arizmendi founders picked bakeries because it is a simple business to replicate, with high consumer demand. But as they grow stronger, and now that they are established enough that they can actually access credit from some traditional banks, they plan to replicate the model in other industries, and support the foundation of strong co-op investment banks nationwide.

The success of Arizmendi has played a big part in convincing the City of Berkeley to pass a resolution requiring the city to spend procurement dollars with cooperatives. Close by, Oakland is preparing to do the same. Both cases are explicitly cited as part of these cities’ drive to combat gentrification, which demonstrates how the cooperative sector is finally getting the interest it deserves from savvy government administrators.

By far the most interesting new battle for workplace democracy, however, is taking place in Jackson, Mississippi. Founded in 2013, Cooperation Jackson is creating a network of interlocked co-operatives, with a similar long term plan to Arizmendi, but whose aim is directly framed in a language of racial justice and human rights.

Mississippi is the poorest state in the United States, and Jackson (the state capital) has an 85% African American population with nearly a quarter of the city living under the poverty line. Financial institutions in the area benefit from urban poverty through measures like overdraft fees and payday loans. As a result, the reactionary interests of these southern banks cause them to flat out refuse to lend to cooperatives.

Given the poverty of the area, the speed and energy with which Cooperation Jackson has managed on a shoestring to organize the foundation of these co-ops is remarkable. These cooperatives are elegantly designed to trade directly with one another in neat cycles: an urban farm grows vegetables to be sold to a café, whose waste goes to a recycling and composting co-op, whose fresh compost goes to the urban farm.

The intent isn’t just to get more people in Jackson into co-ops good wages; it is to build a self-sufficient power base of black liberation which can actively pressure government to validate them. Jackson’s most pressing issues, like water privatization and housing insecurity, fall most heavily on its poor black neighborhoods, and Cooperation Jackson makes no bones about their intent to resist the “onslaught of reactionary legislation, being forced on Black, Indigenous, immigrant and working class communities in Mississippi”.

Change at a governmental level won’t come because people ask nicely; it has to be shown that policies capitulating to white supremacy and neoliberalism will come at too high a cost.

That is the reality that the cooperative movement across the whole country is beginning to step up to: that the left can’t wait for politicians to offer solutions, they need to build countervailing power. They need to be able to afford a struggle. This isn’t a business model, it’s an organic intervention designed to wrestle control from the ruling class before they lay the entire nation to waste.

Criticism has come from parts of the left that worker ownership can never “succeed by competing on capitalism’s terms”. This assessment isn’t totally unfair. The move towards worker ownership can at times be incoherent about the role of public sector workers and trade unions in this ‘evolutionary reconstruction’.

And many point to the way Mondragon itself has suffered from a certain creeping neoliberalism in recent years as a result of its exaggerated claim to have resolved class struggle: anthropologist Sharryn Kasimir observed that trade unionism and strike action in the Basque country has in many cases given unionized workers better pay and conditions than those within Mondragon. Insufficient checks and balances against Mondragon’s powerful managerial layer hint at potential future problems for the Cleveland Model, which may yet suffer from internal pressure by customers to challenge the agency of worker-owners.

But new contenders like Cooperation Jackson are beginning to demonstrate how the struggle can and should be politicized, and many in the movement are now arguing that politicization and class consciousness will be crucial for asserting its transformative potential. A few clever soundbites of start-up culture, they argue, will not be enough to save us. Emerging progressive economic policy ideas like a universal basic income won’t be able to fix the economy of the future without the nature of that economy having already been changed, and that means necessarily viewing cooperative economics within a framework of transformative social and racial justice.

Ed Whitfield is a co-founder of the Fund for Democratic Communities (F4DC), a foundation that provides over $1 million every year to seeding community wealth in the South. Aside from being heavily involved in the cooperative movement at large, Whitfield’s work seeks to address the case for reparations to Black America, looking at the reparations struggle as not simply how to win it but on what to do once this has been achieved.

A major part of Whitfield’s argument is that reparations should be invested in a cooperative economy, drawing on Du Bois’s earlier work in the same vein. He told a conference in New York in 2015 that reparations must be about “creating new systems of being with each other so that the value of a human being is their full human value.”

Forty acres and a mule was a production unit, not a consumption unit,” Whitfield pointed out. “A mule can grow corn, it can feed itself. A Cadillac won’t feed you or itself or anybody else in the neighborhood!”

Addressing Audrey Lorde’s famous adage that ‘the master’s tools will never dismantle the master’s house’, Whitfield told his audience: “yes they will; just not when you’re standing inside.”



Image: Kheel Center

December 5. 2016