Cooperatives: Born and Bred for Hard Times

Credit default swaps, TARP, Ponsi schemes, too-big-to-fail investment banks; our news is full of economic concepts many of us hadn’t heard of before. With all the dire forecasts and hand-wringing over “how could this have happened” and what the “right” solution is, as parties line up accusing each other of being “corporate” or “socialist,” I’m left to wonder; where are the new ideas? Where is the out-of-the-box thinking? Where is the vision for a different model of economics?

Why aren’t we hearing more about those financial institutions that are strong because of the way they are formed – credit unions? Credit unions are financial co-ops, and like all cooperatives they exist to serve their members. So they don’t charge exorbitant interest rates or engage in risky investments. If one were to be mismanaged or fail, it would not bring down the whole house of cards, because while co-ops can form associations with other co-ops, (Co-op principle #6, Cooperation among Cooperatives) each co-op is independently owned and managed by its members (Co-op Principle # 4, Autonomy and Independence).

Here in Wisconsin, we are surrounded by cooperatives. Farmer-owned co-ops, agricultural supply co-ops, marketing, petroleum, insurance and food co-ops. Most of us receive our telephone and electric services through co-ops. How did that come about? When the for-profit corporations were wiring communities for electricity and phones, they did not do so in the rural areas because there weren’t enough customers for the effort to be profitable. The only way for rural areas to receive these services was to form consumer co-ops.

Cooperatives were born in the hard times of the industrial revolution, they survived and thrived during the Great Depression, and there is good reason to anticipate that co-ops will thrive and many more will be born during our current incarnation of “hard times”.

It was in 1844 in Rochdale, England, that the modern-day consumers’ cooperation began. Twenty-eight flannel weavers registered with the Parliament under the hopeful title, “Rochdale Society of Equitable Pioneers.” The previous year these workers had been fired and then blacklisted by their factories after they had organized a strike for better wages and failed. Now they decided that if they could not organize for better wages, at least they might organize as consumers for lower prices.

It took them a year to save the necessary capital to begin the venture. They opened their store with a very meager selection of butter, sugar, flour, oatmeal and a few candles. Within three months, they expanded their selection to include tea and tobacco, and were soon known for providing high quality, unadulterated goods. Ten years later, the British cooperative movement had grown to nearly 1,000 cooperatives.

By 1900, it had 12,000 members and $1,500,000 in sales. It added bakeries, dairies, building and painting services, and a laundry and coal delivery service. In protest against the food tainting by local millers, these co-operators opened and operated their own corn mills. Later they bought and operated the very mill from which they had been blacklisted.

“As the Pioneers made progress, a coherent philosophy emerged... When members exchanged money over the counter for cooperative goods, an empire was born, an empire meant to equalize, not to exploit. Revolutions were occurring frequently, throughout the world. While others urged armed revolt, strikes, and mass action on the streets, the cooperators were quietly building the people’s business.”¹

Here in the US, the Great Depression created similar woes for the working class, who through no fault of their own were cast into poverty. California in the early 1930s was as bleak as it was elsewhere in the United States. More than a quarter of the breadwinners in the state were out of work. There were no federal or state relief programs; nothing but some local charity.

Although the financial system experienced a meltdown, farmers still were producing; more than they could sell. Fruit rotted on trees, vegetables in the fields. Factories sat empty. Machinery was idle. Old trucks were in side lots, needing only a little repair. Workers were needed, and workers needed work.

In the spring of 1932, in Compton, California, an unemployed World War I veteran walked out to the farms that still surrounded Los Angeles. He offered his labor in return for a sack of vegetables, and that evening he returned with more than his family needed. The next day a neighbor went out with him to the fields. Within two months 500 families were members of the Unemployed Cooperative Relief Organization (UCRO).

That group became one of 45 units in an organization that served the needs of some 150,000 people. The UCRO was just one organization in one city. Groups like it ultimately involved more than 1.3 million people, in more than 30 states. It happened spontaneously, without experts or blueprints. Most of the participants were blue collar workers whose formal schooling had stopped at high school.²

The number of agricultural cooperatives at the close of 1935-36 was 10,500, with 69 percent of them located in the 12 north-central states and 8 percent operating in western states. Minnesota lead the nation with 1,401 associations, followed by Wisconsin with 1,086, and Iowa with 954. Cooperative farm supply purchasing skyrocketed from $75.9 million in 1924 to an estimated $250 million in 1934.

The increasing use of motor-driven equipment by farmers gave rise to petroleum cooperatives starting in 1921. Their growth was particularly dramatic in the Midwest, fueled by the extensive use of tractors, trucks and other motorized implements. By 1935, about 2,000 associations supplied petroleum products valued at $40 million. This period also marked the development of regional or statewide wholesale federations of local fuel cooperatives.³

The word crisis can be defined as both “danger and opportunity.” The cooperative model has been shown itself to be an opportunity not only in prosperous times, but especially in the “dangerous” hard times.

The cooperative model seems to defy what economists call “economic law”– that people work only for personal gain and in response to schemes of personal incentive and reward. It is a model that defies being labeled either capitalism or socialism. (Cooperativism?) Cooperatives exist to serve their members and are governed by values, and although co-ops are a collective model they are not controlled by the state. The principles and values of “co-operativism” provide a positive, workable alternative to competitive capitalism.

However you categorize it, ours is a business model that endures. Already the US Federation of Worker Cooperatives is seeing a surge in national interest in worker co-ops. Director Melissa Hoover has helped steer nurses, truck drivers and fishermen to the information they need to start their own co-ops.⁴

Cooperatives are the foundation of economic democracy, which Colombia University professor Dr. Gary Dorrien defines as “extending the values & rights of democracy into the economic sphere. It is about democratizing power, and creating environmentally sustainable economies…. Gains towards social and economic democracy are needed today for the same reason that political democracy is necessary – to restrain the abuse of unequal power. This crisis puts into play new possibilities for a surge of social justice movements and economic democracy.” I highly recommend watching his visionary presentation about Economic Democracy on YouTube.⁵

Or, as Joseph Ecklund, VFC Cashier wrote in his recent rap “Down at the VFC,”

Giant corporations are acting so shady
All for profit VOID of morals maybe?
Seems these frightening times call for a new philosophy
A new model to help stop these atrocities.
So I joined my local food cooperative
for ECONOMIC DEMOCRACY! ⁶

Since 1995 the Viroqua Food Co-op has served its members, now numbering over 2500. We work to strengthen ties within the community and to provide alternative food buying options for Viroqua. We support dozens of local growers and producers by providing a retail outlet for their products. We recognize that practicing good business citizenship supports the mission of our Co-op and will help raise the overall level of social and economic well being in our community.

by Charlene Elderkin, Marketing & Membership Manager

 

¹Excerpted from Weavers of Dreams by David J. Thompson. http://wheatsville.coop/faqc.html
²Entrepreneurs of Cooperation by Jonathan Rowe. http://www.yesmagazine.org/other/pop_print_article.asp?ID=1464
³Cooperatives Help Farmers Survive the Great Depression, Position Themselves for New Marketing Opportunities. http://www.rurdev.usda.gov/rbs/pub/jan99/1930s.html
⁴Worker Co-ops Down by the Bay by Gabe Rivin. March-April 2009 Cooperative Business Journal. p 6-9.
⁵Alternative Model: Economic Democracy, Dr. Gary Dorrien, YouTube
⁶Down at the VFC, Joseph Ecklund, lyrics available on Youtube