In These Times of Crises Can Cooperatives Come to the Rescue?

This invited think piece is published to mark International Cooperative Day. Held on the first Saturday in July every year, the theme for 2013 is "Cooperative enterprise remains strong in times of crisis".

Currently the world is simultaneously experiencing a number of crises that interact with each other to reveal structural imbalances. Historically, cooperatives have been known to emerge in such times of crisis, whether it be natural disasters, conflicts or financial and economic turmoil. For example, unmet social care needs in rapidly ageing societies have brought forth the recent growth in social care cooperatives. Set up by migrant domestic workers providing home-based child-care and elderly-care services, these cooperatives provide employment intermediation, finance, housing, and education and health care services to their members.

Despite their history and the mounting evidence that they are viable enterprises, there is unease about cooperatives in some development circles. Reasons for such reluctance include perceived government imposition and control, lack of solid data and unrealistic expectations. Cooperatives, as value and principle-driven ethical enterprises, can provide critical services to their communities, given the right conditions. Internally, members and managers of cooperatives must receive appropriate education and training. Externally, legislation and policies are needed that allow cooperative enterprises to function as autonomous, independent, member-owned, democratic enterprises.

Simel Esim, the Chief of the International Labour Office’s Cooperative Branch, is a Turkish-American political economist, who has worked in social and economic development for twenty years. Prior to joining the Cooperative Branch she was a Senior Technical Specialist in the ILO’s Regional Office for Arab States for eight years. Ms. Esim holds a Ph.D. in economics and has focused her career on informal employment, enterprise development and women’s economic empowerment.

Introduction

Currently the world is simultaneously experiencing a number of crises that interact with each other. Financial and economic crisis, youth unemployment and conflicts, climate change and natural disasters all reveal the structural imbalances between the financial and the real economy, between the poor and the rich, between regions, countries and within them. This deepening convergence of economic, social, ecological and political crises on a global scale is increasing the urgency to strengthen alternatives inspired by international and intergenerational solidarity.

Historically, cooperatives have been known to emerge in communities that are going through major transformations, be it industrial revolution, earthquakes and tsunamis or financial crisis. A 2009 ILO report on the Resilience of the Cooperative Business Model in Times of Crisis provides historical and empirical evidence on how the cooperative model of enterprise survives crisis, maintaining the livelihoods of the communities in which they operate (Birchall and Ketilson, 2009).

There are as many types of cooperatives as there are crises. Housing cooperatives come to the rescue in communities where homes and businesses have been destroyed in natural disasters. Cooperative banks step in during times of financial turmoil and the resulting crisis of trust in investor-owned banks. Worker cooperatives emerge as a viable option for transferring ownership of businesses that are facing bankruptcy.

The emergence of cooperatives was a distinct phenomenon during economic hardship in the 1840s in the UK, when consumer cooperatives boomed; agricultural depression in the 1860s in Germany led to large-scale creation of rural cooperatives; the Great Depression of 1929-1930 in the USA produced many self-help cooperatives; and the financial crisis in Argentina in the early 2000s resulted in many worker cooperatives being formed.

The ongoing financial and economic crisis in North America and Europe has had negative impacts on all types of enterprises. However, a 2013 report from the ILO, Resilience in a downturn: The power of financial cooperatives, reflects on the success of financial cooperatives during the global financial crisis as a credible alternative to the investment-owned banking system. They continued to provide banking services to people on low incomes, stabilized the banking system, regenerated local economies, and retained and created employment (indirectly). In a similar vein, the European Parliament recently adopted a report on the resilience of cooperatives to the crisis in the region. The report attributed this to a number of factors including the cooperative model of governance, which is based on joint ownership and democratic control by members, as well as the longer term approach to capital accumulation and anchoring in local economies (European Parliament, 2013).

New crises, new cooperatives

New crises are also bringing about the emergence of new types of cooperatives. For example, social care cooperatives are increasing in numbers in response to the growing care needs of ageing populations in a number of regions. The gap in the provision of care services for the elderly is also increasing because the social expectation that women will continue to assume the customary role of unpaid care providers is in decline.

An increase in the immigration of women from poorer nations to wealthier ones who are working as domestic workers and in home-based child-care and elderly-care can fill these unmet needs. Cooperatives of domestic workers are emerging as forms of enterprise and association, providing their members with services ranging from employment intermediation, finance, housing to education and health care. The provision of employment intermediation services that is common among domestic worker cooperatives in the US, especially among immigrant women workers, is emerging as an example that other countries are interested in replicating.

Despite their historical relevance and the mounting evidence that cooperatives around the world have proven to be viable enterprises, the development community has been rather lukewarm when it comes to integrating them into their policies and programmes. There is in fact reluctance and unease in some circles when one starts talking about the value added by cooperative enterprises when facing crises.

One cause for such unease is that many people seem to see cooperatives as development tools that are imposed upon people by their governments. While this concern may be well-placed in some cases, it should not be over-generalized as many countries have been making significant steps toward establishing cooperative legislation and policies that allow cooperative enterprises to function as autonomous, independent, member-owned, democratic enterprises. Many of these initiatives are guided by ILO Recommendation 193 on the Promotion of Cooperatives (2002). Since its adoption, the Recommendation has inspired more than 70 countries in the world to change their policies and legislation based on its provisions.

Another reason for this reluctance is the scarcity of sound statistics on cooperative enterprises, such as the number of cooperatives, sectors of activity, membership, employees, as well as financial indicators such as assets, turnover and reserves. For the first time in its history, the International Conference of Labour Statisticians will be discussing statistics on cooperatives during its upcoming meeting in October this year. It will explore ways of integrating data on cooperatives into regular establishment or household surveys which could help identify cooperatives and their members with little additional cost to national statistical services.

A third cause for concern is that proponents of cooperatives may at times have unrealistic expectations of cooperatives, apparently seeing them as a panacea for a range of economic and social challenges. And when cooperatives fail to deliver on these fronts, disappointment settles in with a sentiment that the ‘model simply does not work’. It is true that cooperatives, as value and principle-driven ethical enterprises, can provide critical services to their communities and even become schools of democracy, promoting social dialogue, consultation and negotiation. However, getting there requires a number of processes to be in place. Internally, members and managers of cooperatives need education and training on the principles and values of cooperatives as well as cooperative management know-how. Externally, a level playing field between cooperatives and other forms of enterprises needs to be ensured, including access to funding and business support. With appropriate legislation and policies in place, cooperative enterprises can successfully function as autonomous, independent, member-owned, democratic enterprises.

REFERENCES

Birchall, Johnston, Lou Hammond Ketilson. 2009. Resilience of the Cooperative Business Model in Times of Crisis. Report for the Sustainable Enterprise Programme. International Labour Organization, Geneva. http://www.ilo.org/wcmsp5/groups/public/---ed_emp/---emp_ent/documents/publication/wcms_108416.pdf, accessed on 8 July 2013.

Birchall, Johnston. 2013. Resilience in a downturn: The power of financial cooperatives. International Labour Organization, Geneva. http://www.ilo.org/wcmsp5/groups/public/---ed_emp/---emp_ent/---coop/documents/publication/wcms_207768.pdf, accessed on 8 July 2013.

European Parliament. 2013. Draft report on the contributions to overcoming the crisis. PR\928237EN. 27 Feb 2013. http://www.europarl.europa.eu/sides/getDoc.do?pubRef=-%2F%2FEP%2F%2FNONSGML%2BCOMPARL%2BPE-506.085%2B01%2BDOC%2BPDF%2BV0%2F%2FEN, accessed 8 July 2013.