Photo Credit: Women Cooperative Members Posing For Group by Joselito Briones/Stocksy.coop
By Trebor Scholz, Doug O’Brien, and Jason Spicer
For anyone who could, work has moved to digital platforms over the past twelve months. But it’s not all Zoom and doom. In fact, U.S. President Joe Biden promised to become “the most pro-union president you’ve ever seen.”
It’s a moment of transformation; with hopes for the revision of broken U.S. Labor Law, which, over the past fifty years, has not meaningfully supported workers, should be high on the agenda of the incoming administration. That’s why we welcome the Clean Slate Project, co-directed by Professor Benjamin Sachs at Harvard University and Sharon Block who has just joined the Biden-Harris Administration. In 2020, the Project’s co-directors published the report “Clean Slate for Worker Power: Building a Just Economy and Democracy.”
It’s much needed. The pandemic is hurting people working in tourism, healthcare, and the service industry; it harms incarcerated people and those with disabilities. Millions are unemployed. A year into the pandemic, many people are struggling with childcare, and 28 million Americans are facing evictions. Twenty-two percent of small businesses in the U.S. are devastated. Forty-one percent of African American businesses closed in the first few months of the pandemic alone. Meanwhile, some of the digital platforms which have enabled work to continue through the pandemic (“pandelivery”) have only served to exacerbate precarity and the long-running decline in worker power against capital.
Frequently, experts point to U.S. history, identifying unions and government as the two key countervailing forces to capital by asking: “What else has ever changed anything on a large scale?” In his book Beaten Down, Worked Up, for instance, veteran New York Times journalist Steven Greenhouse celebrates union successes: “In the late 1940s and the 1950s, through landmark contracts with General Motors, Ford, and other industrial giants, unions played a decisive role in building the biggest, richest middle class the world had ever seen.” The Clean Slate for Worker Power report echoes the understanding of unions as the main force for good, pointing out that “We know from history that when workers come together and collectively build organizations that are capable of countervailing the power of the wealthy and the power of corporations, the outcomes are profound.”
Thus, while it is true that unions and government can claim major successes in the fight to advance worker power, are these the only options? The Clean Slate report has drawn on dozens of experts for their opinions, but only one co-op expert was consulted and cooperatives do not appear at all in the report.
This is not a one-time oversight. Policymakers, union advocates, and professors in the halls of esteemed American universities, systematically ignore cooperatives in the discussion about worker power.
Skeptics cite a lack of funding, an inability to scale up, and inefficient governance as insurmountable obstacles. Worker co-ops, in particular, are portrayed as idealistic aberrations of little consequence. In the U.S. context, with its individualistic culture and particularly harsh strain of capitalism, cooperatives are assumed to be an unrealistic option. Yet as the pandemic deepens the troubling consolidation of economic power among a small number of venture-capital-backed digital platforms, the promise of platform co-operatives to act as an innovative and countervailing force directly advancing worker power warrants a second look.
In his popular book Platform Capitalism, the British scholar Nick Srnicek argues that fighting monopolistic trends by building up platform co-ops faces all the “traditional problems of co-ops (e.g., the necessity of self-exploitation under capitalist social relations) which are made even worse by the monopolistic nature of platforms, the dominance of network effects, and the vast resources behind these companies. Even if all its software were made open-source, a platform like Facebook would still have the weight of its existing data, network effects, and financial resources to fight off any coop rival.”
Yet platform co-ops, as an example of digital cooperative ownership, can scale their operations and governance at a lower cost than brick-and-mortar cooperatives with the help of blockchain, other distributed ledgers, smart contracts, and data trusts. They benefit from the fact that cooperative ownership of companies is more easily scaled online than offline: a long tail of federated, small producers can act as one large entity, thereby competing in the marketplace. In fact, as the economy continues to be transformed by digital platforms, the cooperative model offers the potential to meet the moment, directly reversing the decline in worker power through the creation of democratically governed alternatives to the likes of Amazon. This countervailing potential of cooperatives was noted long ago by the Canadian-American Harvard economist Galbraith himself, in his original work which developed and made famous the idea of ‘countervailance’ to advance worker power against capital.
Nevertheless, there is a long list of often-rehearsed claims that put the effectiveness of co-ops in question, some of them going back to the comments Rosa Luxemburg made in 1900. Skeptics argue that co-ops only serve the members of the co-op which limits the impact of the model significantly. They may not have learned about multi-stakeholder co-ops, in which workers can be one class of owner-members alongside consumers, producers, and socially-minded investors. Worker co-ops too can empower workers. Their membership includes 62.5 percent women and 58.8 percent people of color. They are businesses that are owned and controlled by the people who work at or depend on a given business. These businesses can also be unionized, adding further protections for workers.
Another claim suggests that platform co-ops when scaled internationally through digital platforms can no longer guarantee the trust of members. Consider a co-op with tens of thousands of members, distributed all over the planet. The effective connection and trust of local co-op members could be lost with a global platform co-op.
While this is an understandable concern, one of the cooperative movement’s central scaling innovations, the formation of cooperatives-of-cooperatives, offers a possible solution and the potential of the best of both worlds: scale and trust. In such structures, local or regional co-ops can act to maintain local trust among members. In turn, these local or regional co-ops can federate, and be joint co-owners of related “upstream” businesses. Variations on this well-known cooperative federating structure, which are effectively a reverse franchise model, can be seen around the world in large worker and multi-stakeholder cooperatives. While Mondragon of Spain is of course the most high-profile example, there are many others around the world, and today, platform cooperatives build on this long legacy of cooperative innovation to achieve scale in an ever-changing economy. At Harvard University, Professor Richard Freeman goes so far as to suggest that worker ownership of robots is the only way to build ethical Artificial Intelligence.
An additional critique of co-ops, especially worker cooperatives, is their rarity and lack of scale, particularly in the U.S. There are a mere 465 known worker cooperatives in the U.S. It’s a tiny sector. But there are, nonetheless, successful worker cooperatives in the United States, in multiple industries: the largest, with a few thousand worker-owners, is New York-based CHCA, a women-of-color-led, unionized home health care cooperative. Other American worker co-ops of substantial size include Wisconsin-based Isthmus Engineering and California-based Arizmendi. And it is the promise of worker platform co-ops to scale this model up and wide.
What’s more, the overall co-op movement is hidden in plain sight; its size is significant. The cooperative blind spot ignores that more than one third of all Americans—120 million people—are members of cooperatives. There are over 65,000 co-op establishments in the U.S. and 3 million co-ops globally. U.S. co-ops employ 2.1 million people, provide more than $74 billion in annual wages, and earn a revenue of $650 billion. These establishments exist in energy, consumer finance, childcare, food distribution, health care, insurance, agriculture, telecommunications, and other industries. Roughly 1.5 million out of the 2.2 million farmers in the United States belong to a co-op, accounting for 55% of total U.S. agriculture sales. Nearly 80% of all milk production is marketed or handled by cooperatives at some point. When one looks at sectors that have gone to scale in the U.S.—agriculture, rural electricity, and credit unions—one finds the same story at work, again and again: People come together around a common problem; they create cooperative businesses to solve the problem, and they also work to change government policy to enable the establishment and scaling of the cooperatives. At the beginning of the 1930s, for example, only 10 percent of rural people in the U.S. had access to electricity, while 90 percent of urban households were already electrified. President Franklin D. Roosevelt created grant, loan, and technical assistance programs to solve this problem, but the existing investor-owned utilities chose not to participate as the projects were not profitable enough. Meanwhile, farmers who had already been using cooperatives for decades in agriculture decided to form consumer utility cooperatives to access the government programs and to work to improve the enabling policy for cooperatives. Within a generation, 90 percent of rural households had access to electricity. Today, rural electric cooperatives serve 20 million businesses, homes, and schools in 48 states reaching well over 40 million people.
Concrete Policy Actions That Federal and Local Actors Can Take
Given this legacy of success in the U.S.—and around the world—the Clean Slate report’s exclusion and implicit dismissal of cooperatives is unfortunate. Just as any business model requires appropriate policy treatment to enable its widespread use, so do worker, platform, and multi-stakeholder cooperatives. In 2020, the Urban Institute released a report outlining actions that could be taken by policymakers to support people seeking to use cooperatives, including better enabling legislation, financing tools, technical assistance, and preferences in contracts and procurement. But there is still much that needs to be done to improve cooperative policy frameworks to enhance worker power in the U.S.
Nationally, the Biden-Harris administration could seek to finally implement the Main Street Employee Ownership Act. Passed in 2018, this legislation empowered the Small Business Administration (SBA) to include employee and worker ownership models, like cooperatives, across its various lending and technical assistance activities. The SBA, which in 2020 alone guaranteed nearly $30B in loans through its 7(a) program, has long performed a critical role in the development of new businesses. Beyond the 7(a) program, its Small Business Development Center program provides assistance to entrepreneurs around the U.S., and its Small Business Investment Company fund-of-funds program provides additional capital. Historically, co-ops were often either excluded or not clearly eligible for these programs. The Trump administration failed to implement this legislation. Nominated SBA administrator Guzman from California, however, has some familiarity with these models, and we hope under her leadership, the SBA moves to fully include worker and multi-stakeholder cooperatives, including platform cooperatives, as eligible for lending and technical assistance services across the Agency’s portfolio.
COVID-19 economic recovery efforts also create an opportunity to advance worker power, by creating dedicated funds and technical assistance for businesses that might transition to worker-ownership as part of the recovery. As it was, in the pandemic “before-times,” a wave of healthy, Baby Boomer-owned small businesses were at risk of closure simply because they could not find a buyer. With the effects of the pandemic on small businesses, this problem—and the appeal of worker ownership as a solution—has only become more appealing. A host of groups, like Project Equity, PCC, and the Main Street Phoenix Project, among others, are already getting traction on this front. How much more broadly could these types of efforts scale, with the kind of policy frameworks that policymakers chose to create to enable people in the U.S. to establish rural electrical cooperatives, agriculture cooperatives, and credit unions?
Beyond the SBA and COVID-19 recovery actions, more generally, the Biden Administration could consider re-animating the Obama-era Inter-agency Working Group on Cooperative Development (IWGCD) and prioritizing employee and cooperative ownership to examine ways to improve cooperatives’ access to and inclusion in programs across Federal government agencies.
Historically, U.S. federal policy action has often followed experimentation and organizing at the local scale. Around the U.S. today, cities and states have been experimenting with a range of policy actions to support worker and community ownership, including cooperatives, by removing barriers to their eligibility and inclusion in existing urban economic development programs, improving provision of technical assistance and education to new entrepreneurs about cooperative models, and incenting cooperatives’ use in existing government procurement/purchasing programs and direct lending programs. States are undertaking similar actions and have also moved to update the laws governing cooperatives’ incorporation, many of which were woefully out of date. As a sense of the best practices across cities and states emerge, we suspect they might inform the development of other federal policy recommendations. This might also help harmonize the treatment of cooperatives across states, which is a particularly critical issue for digital and platform co-ops, which often seek to work across state lines.
But for any of these recommendations to have a chance of succeeding and to gain a place at the policy table, however, they need widespread backing, including from the broader movement for worker power. With history as a guide, if the Democratic Socialism movement in the U.S. gains traction, more centrist policymakers are likely to push for cooperatives as a way to temper the severity of American capitalism. To that end, efforts like The Clean Slate for Worker Power project would do well to consider the potential of platform cooperatives and lend their active support to the cooperative movement and its policy goals.
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