Working Together: A Benefit for Workers and the Economy

Cooperative development provides major benefits over traditional corporations. It focused on building cooperative enterprises and promoting a cooperative atmosphere. These corporations are owned by the workers either directly or by having workers own the majority of a company’s shares. The encouragement of cooperatives in the United States would greatly benefit the U.S. economy. Traditional corporations suffer from a few flaws that cooperative companies are better able to address, such as a top down, supply-push approach. This means that decisions are made by those at the top of the firm about how much and what to produce. They then leave it up to the rest of the firm to push this supply out into the market and clear their inventory. Cooperatives offer a much more dynamic approach whereby workers on the ground are better able to gauge demand and adapt to changing circumstances. This provides clear benefits to certain sectors of the economy where flexibility plays a key role. In order to examine the positive effects that cooperatives can have, it is necessary to see the system in practice.

The best example of such an economy is located in the Italian region of Emilia-Romagna. In this area, cooperatives account for about 30% of its GDP. The concentration of worker ownership varies across different sectors and can run as high as 50%. With such a high percentage of worker ownership, Emilia-Romagna also boasts one of the lowest unemployment rates and highest per capita incomes in Europe. This system of organization, however, did not entirely come into existence organically; rather, it was built up through intentional government policies.

The building of this cooperative ecosystem was implemented in a few phases. The first phase was the official designation and registration of coops in Article 45 of the Italian Constitution of 1948. With this official registry, local and federal Italian governments could determine which companies were eligible for state subsidies. This first step created the infrastructure necessary for further encouragement of cooperative firms. State and local umbrella organizations were created sector-by-sector to support the coordination and networking of individual cooperatives in the system. Overseeing the registry and official designation, these umbrella organizations were able to provide the vital forum for cooperatives to synergize with each other. The second phase consisted of two bills: a 1971 bill called the “small reform” and a more elaborate 1977 bill. The “small reform” essentially decreased taxes on the deposits and loans provided to a coop by members of that coop. Financing through member loans proved to be critical to the growth of coops in the 1980s and 1990s as member loans comprised more than half of the necessary funds. The 1977 bill allowed coops to keep undistributed profits in reserves that were exempt from corporate taxation. This greatly increased the ability of coops to self-finance and also contributed to the expansion and strengthening of the cooperative sector. The final phase of legislation came with the passage of “Law 59” in 1992. Law 59 required that coops pay 3% of their profits into a fund that would be managed by their relevant umbrella organization. This would give those organization additional resources to encourage new coops to start in addition to restructuring old coops. By giving the umbrella organizations this enhanced power, Law 59 increased flexibility within the cooperative system. The combination of these reforms created an atmosphere very conducive to cooperative development.

If applied to the United States, these reforms could be just as effective. Cooperatives are more effective in the service sector because they provide a more dynamic and flexible work atmosphere. The encouragement of cooperatives in the United States could follow from the Italian model. Individual states could take the initiative by starting their own registries of cooperatives using a federally formulated definition of a cooperative. As in the Italian case, umbrella organizations could help foster a cooperative atmosphere in each state while building the networks necessary for cooperatives to thrive. Each state government could operate their own umbrella organizations to tailor cooperative development to its state’s unique economic situations.

Another critical step in the development of a cooperative economy could come in the form of federal tax relief. If the federal government were to give cooperatives sweeping relief from high corporate tax rates, this would allow cooperatives to grow faster organically through self-financing. By also decreasing financial regulatory requirements of cooperatives, the federal government could encourage the same kind of member financing that fueled cooperative growth in Italy. Even making these simple structural changes would give cooperatives an added ability to compete and thrive within the American economy.

As in the Italian case, umbrella organizations could help foster a cooperative atmosphere in each state while building the networks necessary for cooperatives to thrive.

In addition to these structural changes, cooperatives could gain a swift foothold in America by targeting specific industries. According to the Bureau of Labor Statistics, 81% of U.S. workers are employed in service sector jobs with 10%, 12%, and 13% of that total figure coming from retail, local government and healthcare, respectively. Coop, the largest retail chain in Italy, demonstrates the success of a cooperate model in the context of retail specifically. Controlling close to 20% of the supermarket and hypermarket share, the entire enterprise is still owned by its 7.4 million members. With retail jobs accounting for 10% of the U.S. workforce, and with that number only increasing each year, the cooperatization of this sector should be a major target for the cooperative movement.

Moreover, state and local governments, by their very nature, provide services that are very personal and labor intensive. Personalized care and regulations are often at loggerheads as ground level service providers are forced to tick boxes rather than provide superior service. Cooperatives offer a solution to the problem of ever increasing bureaucratization. These social coops provide high quality of services with low cost in Italy and their implementation in the U.S. could be an alternative to increasing state and local bureaucracy.

By far, though, the most significant sector that cooperatives should target is healthcare. Accounting for 13% of U.S. jobs, the entire healthcare industry is growing at a rapid pace. Because the healthcare industry is expanding, new social coops can be encouraged to fill this ever growing need. This would be a great opportunity for cooperatives to gain a strong foothold in a major American industry. Of course, all of these benefits can only be realized if these reforms are actually implemented.

By their nature, cooperatives are more than feasible in the present American political climate. For Republicans, worker-owned cooperatives offer a few key advantages. Tax reform, for example, has been a recent focus of Congress and the administration. Cooperatives offer a tangible way for Republicans to help ease the tax burden on small business by reforming the tax code to favor cooperatives. Considering Republican rhetoric that supports lower taxes, small businesses, and decreased regulation, supporting cooperatives would be a win for Republicans in all three of these categories. Moreover, if the necessary umbrella organizations are set up in the individual states, Republicans would be credited with passing federal power to the states. Democrats, too, would benefit from supporting these reforms. Cooperatives give workers greater control over their workplace and offer higher pay than non-cooperative businesses. Therefore, supporting cooperatives would be a win for Democrats by strengthening the power of workers in their states. Cooperatives are thus not only economically beneficial, but also politically feasible. Appealing to sentiments both major parties can endorse, cooperative development can be a step forward in making the U.S. economy more robust and better for workers.

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