Developing democracy: cooperatives and democratic theory

Abstract

Impoverished communities often suffer not only from the lack of wealth, but also from a kind of democratic deficit. To be poor means not only not having money, but also being buffeted by the winds of fortune, with little sense of control over the major forces that commonly affect people’s lives. As a model of development, cooperatives have been promoted not only as a model for community wealth-building, but also as a form of empowerment due to their inherently democratic nature. But how democratic are they, really? This paper explores this question from the perspective of democratic theory, using a theoretical framework developed by the nineteenth-century political economist William Thompson, who laid out the principles on which the cooperative movement is based. An important element of Thompson’s theory is that the cooperative structure alters the socio-economic relations of their members, aligning their interests with one another on the basis of a strong principle of equality. It is this alignment of interests on the basis of equality that gives cooperatives their strongly democratic character. However, the paper finds that the democratic nature of cooperatives is challenged by a number of factors. These include internal dynamics, such as managerialism and size, and external dynamics such as the tensions that may arise between workers and consumers or between members’ interests and those of the broader community. The existence of these tensions and dynamics means that an effective community wealth-building strategy needs to incorporate mechanisms for the harmonisation of interests and the integration of different perspectives in a network model that promotes internal exchange and integration.

Keywords:

• community wealth-building
• democratic theory
• cooperatives
• William Thompson
• empowerment
• democratic practices

Cameron County, Texas, at the southern tip of the state, where the Rio Grande river meets the Gulf and on the border with Mexico, has consistently been identified as the poorest or second-poorest urban county (population over 250,000) in the USA. Cameron County and Hidalgo County, its neighbour to the west, are the only urban counties in the nation with median annual household income of under $25,000 (for comparison, median household income in Texas is over $42,000 and in the US it is over $46,000). As might be expected, these counties also have the highest poverty rates in the country, at over 41%. The colonia Cameron Park, which is surrounded by Brownsville (the main city in Cameron County), has been identified as the poorest urban settlement (over 1000 households) in the country, with median household income of under $17,000, for an average per capita income of just $4100 (Poverty in Texas 2009).

These statistics, dire as they are, do not tell the full story of poverty in Deep South Texas. Poverty is not only a financial condition, but also a political condition. Poor people – and, more broadly, poor communities – suffer from a kind of democratic deficit, best understood as the inability to have a sense of control over their own fate. Poor individuals face innumerable obstacles to escaping their condition – lack of skills and/or education, limited access to health care and legal services, and little chance to act in a proactive manner on the basis of long-time horizons in a way that could get them to a better place. Often at the whims of unscrupulous employers, they are economically, financially and socially disempowered. Similarly, poor communities often find themselves limited in choices and unable to take proactive steps to improve conditions. The standard model of development for low-income communities involves using public subsidies to attract employers, who usually offer mostly low-skill, low-wage jobs that do little more than replace direct public assistance and fail to add much, if anything, to the local economic base. With little or no meaningful stake in the city, net earnings are exported to distant corporate headquarters (and then on to investors around the world), and little regard is given to the effects of the business on the surrounding community. When the subsidies end, or the economic winds shift, the employer goes somewhere else in search of new subsidies, and, a new hole having been made in the local economy, the city goes in search of a new company in an effort to fill the gap and start the cycle again (Alperovitz 2013, p. 53–54).

In this sense, Brownsville is a perfect example of unsustainable development, in the failure of a strategy that relies on attracting employers who view the city as little more than a labour pool and have no firm connection to the city. It is unsustainable in two senses: first, sustainability, by its nature, requires a long-term perspective, which is largely absent when the employers have only a short-term, instrumental view. So, this kind of development is not economically sustainable. Second, because they have no firm attachment to the local community, it is unlikely that they will demonstrate much concern for the ecological impact of their business or consider the local ecosystem to have much value.¹

An alternative, more sustainable model of development, referred to as community wealth-building,² seeks to improve the ability of communities and individuals to increase asset ownership, anchor jobs locally, strengthen the municipal tax base, prevent financial resources from ‘leaking out’ of the area and ensure local economic stability. Such a model of development not only creates jobs, but develops them from the ground up, drawing upon the assets – human and otherwise – of the community and the institutions that serve it. Capital is rooted in the community, so it cannot just pick up and go elsewhere. Further, community wealth-building strategies make the community more self-reliant, better able to address its own needs. This directly contributes to economic sustainability, because it is less reliant on the rapidly changing and always unstable global economy (Shuman 1998). But, as Roseland and Soots (2007) show, communities with a strong, locally rooted economy are also more ecologically sustainable, not only because locally rooted businesses are more likely to be concerned with the local environment, but also because it means that they need to import fewer goods to serve local needs (p. 156–157).³

While there are a number of community wealth-building strategies, including community development corporations, community development banks, various forms of public ownership and employee stock ownership plans (ESOPs) to name a few, this paper will focus on cooperatives. Cooperatives may be seen as the ne plus ultra of community wealth-building, because they not only help to develop and retain wealth in the community, but also build empowerment, thereby helping to address the political aspects of poverty (Roseland & Soots 2007, p. 157–159). Cooperatives do this because they are inherently democratic in a way that is absent from other forms of community wealth-building. This democratic character comes out of the institutional structure of the cooperative in two ways: first in its formal organisation, which requires that all members of the cooperative have an equal voice in its governance; but also in an informal way, by reorienting relationships within the community of members that are based on cooperation and shared interest, rather than competition and individual interest. This reorientation leads to a kind of ‘spillover effect’ that affects members’ relations in the broader community in various ways.

The importance of democracy can be understood in terms of the ‘community capitals’ as Flora and Flora (2013) identify. Two key features of a community are the way it shapes the interactions of its members and the provision of a set of vital resources that, when invested in productive ways, become various forms of capital (p. 10). Democracy affects communities and community capital in significant ways. First, by instantiating a kind of political equality among members, democracy affects their interactions. Second, it enhances the social elements of community capital – social capital and political capital – in important ways, as will be discussed in greater detail below.

Their democratic character is a fairly common point in discussions of cooperatives and community development.⁴ But it turns out that while cooperatives may be inherently democratic, there are also inherent weaknesses and threats that tend to undermine their democratic potential. After all, cooperatives are first and foremost economic enterprises that must be economically successful in order to have a positive impact on the community. This may come into conflict (or appear to) with the social and political objectives that are important to many cooperatives and to the cooperative movement as a whole. There is also substantial diversity within the cooperative movement itself, ranging from consumer cooperatives with millions of members, such as the Co-operative Group in the UK or REI in the US, to multi-billion dollar agricultural producer cooperatives that are composed of autonomous producers and to worker cooperatives that may have fewer than a dozen employees-owners. What democracy means, and how it is embodied, will be different in these different settings. Finally, because the members of the cooperative may only comprise a portion of the larger community, there can develop tensions between those who are members and the rest. The argument of the paper, then, has to do with identifying these threats, tensions and other challenges and with presenting ideas about how they might be addressed.

The first part of this paper will examine the theoretical foundations of the cooperative movement, as this will help to clarify how the tensions and challenges develop. The second part considers the cooperative movement with respect to democratic theory and identifies some of the challenges that are inherent in the operationalisation of that theory. The third section will discuss three possible ways of addressing those problems, and the conclusion will return to Brownsville to consider how the theory might be applied in practice.

1. The ideological foundations of the cooperative movement

The theoretical foundations for the cooperative movement, including its democratic character, were most clearly articulated in the early nineteenth century by the Irish social reformer William Thompson (1968).⁵ Thompson was a strong advocate of a modified form of the cooperative community model first proposed by Robert Owen. These cooperatives, or ‘Owenite’ communities as they are commonly known, were largely autarkic communities of 500–2000 people that included housing, production of finished goods, agriculture, education and childcare.⁶ The property of the community was owned in common by its members, who shared both in the production necessary to fulfil their material needs and in its distribution. The community was to be governed democratically, and all members would have to have an effective voice in its governance.

Central to Thompson’s conception of the cooperative community is an ongoing practice of internal, indirect and informal exchange. Everyone in the community contributes in their own way to the benefit of the community, and everyone enjoys those benefits. Thus, it is a social process where each individual may see himself – or herself – as acting within a network of interaction. This is similar, in a sense, to Marx’s (1967) idea of the social process of production or the ‘social division of labour’ (p. 132), but instead of being a secret process that ‘goes on behind the backs of the producers’ (p. 135), it is direct, open and apparent to all the members of the community. Thompson (1968) considers exchange that comes about through mutual cooperation to be indispensable for the ‘evolution of morality, of beneficence’. A system of mutual exchange enables people to see that cooperation:

is necessary to their mutual happiness: he becomes interested in the success of their joint labours; he feels a sympathy in their exertions; his feelings are carried out of himself…mutual satisfaction is produced, mutual sympathy is excited … a pleasurable association is formed, and the discovery is made that the happiness of others is not necessarily opposed to our own, but is frequently inseparably connected with it [making people] more social … more benevolent. (Thompson 1968, p. 50)

The key to Thompson’s system is the way that it alters the relationship between the members of the community as compared with the liberal capitalist model. Members of the community encounter one another not on the basis of conflict of interests as competitors for scarce resources and/or instruments for personal gain, but as equals whose interests are aligned. This alignment takes place through the particular structure of the institutional context in which this encounter occurs, which establishes the conditions of their encounter. Within this context – the context of the cooperative community – democracy can be understood at its most radical level, as the enactment of equality. In other words, within the cooperative community, democracy is instantiated not only in its formal governance, but in the everyday interactions of people, whose relations are premised on mutuality and equality, which are developed, fostered and maintained through the community’s egalitarian institutional structure.

Cooperatives today, however, are quite different from the autarkic communities that Thompson envisioned. The most significant difference is that the notion of a self-sufficient community of 500–2000 people has been abandoned in favour of an enterprise model in which members of the cooperative own equal shares and democratically control the enterprise. As enterprises, cooperatives are independent economic entities whose primary direct benefit for their members comes in the form of the redistribution of surplus revenue. The abandonment of the cooperative community model came at the loss, or at least moderation, of some of its ideals, but it has enabled the expansion of the cooperative model – the cooperative movement – on a vast scale. The advantage of the economic enterprise model is that it is not limited to small-scale communities providing basic goods to local populations. In fact, it became possible for any kind of economic activity to be organised as a cooperative. So, while it may look very different, there can be little doubt that the size and extent of the cooperative movement today far surpasses anything Thompson could have imagined.

The contribution of cooperatives to community development is well established, but the question here has to do with the ability of cooperatives to address the democratic development of a community while also contributing to its economic development. The question, then, with regard to their democratic character, is whether, or the degree to which, they establish the conditions for the radical encounter of equality that Thompson theorised – in other words, the degree to which they establish the conditions for this radical democratic experience. This is not only a theoretical but also an empirical question, not only because cooperatives today take a wide diversity of forms, but also because the principles that govern them are implemented very differently depending on the type of cooperative as well as factors such as size and location.⁷

2. Democracy and the cooperative movement

The Co-operative Principles, a set of principles based loosely on Thompson’s ideas⁸ and promulgated by the International Co-operative Alliance, the apex organisation for cooperatives globally, clearly state that cooperatives are to be governed democratically on the basis of one person – one vote and, by and large, this requirement is met.⁹ This is a very weak standard, however, so it is reasonable to ask just how democratic the cooperative movement really is. There is no direct answer to this, for two reasons. First, the answer depends on how one defines democracy. Some consider democracy to be an electoral mechanism whereby the members of an association (such as a state) choose representatives who will represent the interests of their constituents within the relevant political institutions. This is often referred to as ‘representative democracy’. Others argue for more participatory systems that establish the means by which the members of the association are able to take an active role in their governance (see, e.g. Pateman 1970; Held 1996). This may be referred to as ‘participatory democracy’.¹⁰ Advocates of representative democracy would be inclined to accept a fairly minimal degree of participation by members, while adherents of the participatory model would set a much higher standard and find a much lower level of democracy as a result. Second, cooperatives are autonomous organisations, and each one is organised differently and operates under different conditions. This makes any evaluation of the ‘movement’ problematic.

One point to keep in mind is that democracy comes into play in cooperatives in both their internal organisation and their external relations (i.e. in their relations with and impact on the community). These interact with one another in dynamic ways. Two factors are of particular importance with respect to democratic practices both internally and externally: size and the type of cooperative.

2.1. Democracy in their internal organisation

The democratic character of the cooperative community in Thompson’s theory comes mostly from the relations obtained in the community itself and in the regular interactions of its members. Such a community would have a formal political structure, with an elected board of directors, but the democratic nature of the community lies mostly in the deep equality of the members. Democracy, in this context, can be understood as a ‘principle of social interaction’ (Kaswan 2014, p. 11), whereby individuals recognise one another as social equals and neither as instruments nor as competitors. Thompson recognises that not everyone is equal in an absolute or complete sense (he recognises, for example, the existence of differences in experience and ability), but they are equal as members of the community, such that no one may exercise domination over anyone else, and no one except children is seen as subordinate to anyone else.

One question, then, in considering how Thompson’s theory applies to the contemporary cooperative movement is the extent to which it relies on the autarkic nature of the cooperative community. Lacking the intensive engagement of a community in which all members live, work and play together, modern cooperatives will clearly not have the same degree of interconnectedness among the membership. The cooperative communities as Thompson envisioned them were easily identifiable as communities in a complete sense: people would both live and work, consume and produce there. Importantly, they would engage in regular exchange with one another, as each would consume what was produced by the others. Through these exchanges, they would form ‘networks of social interaction … premised on mutual support’ (Kaswan 2014, p. 81).

The contemporary cooperative movement lacks these kinds of mutual support networks.¹¹ So, to what extent do today’s autonomous enterprises still constitute a kind of ‘community’? In what ways, and to what degree, do cooperatives today affect the character of the relationships between the members of this ‘community’?

The notion of social capital provides a familiar way (in the social sciences) of discussing the ways different forms of social organisation ‘facilitate coordination and cooperation for mutual benefit’ (Putnam 1995, p. 67). As Majee and Hoyt (2011) note, ‘cooperatives promote interaction. This interaction enables members to use their knowledge of each other and of the cooperative to engage in peer monitoring’ (p. 51). However, not all cooperatives promote interaction – build social capital – in the same ways or to the same degree.

The first point has to do with the type of cooperative. There are three major types. Producer (agricultural) cooperatives are primarily focused on marketing and distribution of goods that are provided by their members. The members generally act as independent entities in the production of their goods (although producer cooperatives, such as Sunkist and Ocean Spray, are increasingly also engaged in processing), and the surplus is distributed on the basis of the volume contributed to the cooperative’s pool. The members of consumer cooperatives are, as the name suggests, consumers who own a particular enterprise and often (but not always) hire people to manage it and perform its functions. The surplus is usually distributed to the consumers based on the amount of their purchases within a given period of time (e.g. quarterly or annually). Worker cooperatives are owned and governed by the people who work there (although there may be a mix of worker–owners and non-owning workers), and the surplus is often distributed on the basis of each worker’s contribution to the enterprise, based on hours worked and/or the nature of the position. In all cooperatives, the members elect the board of directors, although, as will be discussed below, small cooperatives may function as collectives, which is to say that the board of directors is composed of all the members.

Relationships between members are likely to be weaker in producer and consumer cooperatives because there is less interaction between them. For producer cooperatives, the cooperative is often little more than an instrument through which they are able to more effectively market their goods, and any one producer need not have much to do with the other members at all, except when conducting business pertaining to the cooperative. The services that the cooperative provides, from soils management and seed distribution to marketing and distribution of consumer goods, introduce important elements of interdependency that may contribute to the bonding element of social capital, but, especially in the larger cooperatives, these services are provided by professional managers and employees hired by the cooperative and may or may not involve direct interaction among members.

Consumer cooperatives, as retail establishments, may be open to members and non-members alike, and except for a small core of people who are particularly active, members may not even know who in the store at any given time is a member. Relations in worker cooperatives, on the other hand, can be expected to be much more intensive and involve a much higher degree of interdependence, which would tend to establish conditions to build stronger connections which support more strongly democratic practices. That said, informal hierarchies are likely to develop over time, as some workers gain higher status due to their long tenure and experience, or if particular skill sets give some positions a higher status than others. Small worker cooperatives may be expected to have very high levels of interrelation, but in a large cooperative, this may be quite low.

There is a general question that arises here about the compatibility of hierarchy and democracy. Normally, a hierarchy is understood as a particular sort of distribution of power, wherein power becomes more concentrated towards the top of the hierarchy. However, in a worker cooperative (where the issue may be most clearly drawn), there will be a tension between the fundamental equality of the members and the establishment of differential positions. The nature of different functions may establish an effective hierarchy, as some functions are task-specific while others involve coordination and cross internal boundaries. Consider, for example, bookkeeping. This is a general task, which affords the person who performs it to have certain authority over others in the company (e.g. in determining the way accounts are kept, which may have some far-reaching implications). An approach some cooperatives have taken is to rotate tasks among employees, but there are problems associated with this that may undermine the organisation, as not everyone is equally skilled at performing certain tasks. Static assignments, however, may lead to the development of power centres (‘fiefdoms’) that undermine the democratic character of the enterprise. Underlying this is the question of whether the members of the cooperative are effectively able to hold other members accountable – a question similar, in many ways, to the questions of public sovereignty within a representative democracy.

Size is a significant factor, regardless of type. Thompson (1830), for his sake, considered the size within the context of the cooperative community. The minimum of 500 he considered to be the least number required in order to have sufficient diversity of talents and skills to fulfil all of the needs of the community, from agriculture to furniture-making to childcare.¹² Thompson believed 2000 to be the maximum size at which each member would still be able to know the ‘general character and conduct’ of all of the other members (p. 41).

It is different, of course, when considering autonomous enterprises rather than self-sufficient communities. Simply put, the larger the cooperative, the less connection its members are likely to feel with it, the more alienated it becomes from them, the less it must rely on member involvement and the more it must rely on professional management. While increasing professionalisation in management may have positive aspects with regard to ensuring the long-term viability of an enterprise, it also has problematic tendencies as it leads to a class of officials whose interests, focus and concerns may come to be different from those of the membership, and it can loosen members’ sense of responsibility to the organisation.

The question of the type of democracy is significant here, as well. For legal reasons, it may be necessary for all US cooperatives, regardless of their size or type, to have designated officers and a board of directors; in this case, they are no different from Thompson’s model described earlier, which also called for formally elected boards of directors. Despite this, they may choose to govern themselves in a highly participatory manner. But as they grow, even a cooperative that puts participatory mechanisms of governance in place may slowly devolve into a thin, representative model, especially with the rise of a class of professional managers that exercises operational control. Over time, fewer and fewer members may attend meetings relating to governance, deferring decision-making to an elected board of directors (who may defer to the judgment of the professional managers); eventually, participation in elections may decline to a point where only a few members are involved even at that level.¹³

Bemoaning the relatively low rates of participation in large consumer cooperatives, Lambert (1963) comes to the conclusion that the question of democracy does not hinge on the number of people who show up for meetings or vote in elections. For Lambert (1963), the presence of democratic procedures is sufficient, as he considers the ‘essence of democracy’ to be the possibility for the expression of opposition. As long as that possibility exists, even when ‘the members may appear to be sunk in apathy,’ the cooperative has not lost its democratic character (Lambert 1963, p. 73).¹⁴ However, apathy is not generally considered to be a sign of a healthy democracy, and it would at least suggest that the cooperative does not promote the sense of interrelatedness that is essential to establishing a democratic ethos within the cooperative.

With the exception of the so-called New Generation agricultural cooperatives, most cooperatives maintain a level of fundamental equality built into their structure, because all members contribute an equal amount to the capital when they join and have equal voting rights. For producer and consumer cooperatives, members benefit proportionally based on their usage, or patronage, of the cooperative, which means that those who have greater resources (producers who produce more and consumers who spend more) will receive a greater absolute benefit. In this sense, then, the cooperative will not address structural inequalities among members. If a part of the point of developing a cooperative is to attempt to address those structural inequalities, then these types of cooperatives may not be effective – although in either case, by returning net revenue to the community they would still be preferable to corporate development in which profits are entirely exported from the community. Worker cooperatives, however, where pay differentials tend to be much lower than in traditional capitalist firms, would be a much more effective means for addressing these structural inequalities.

2.2. Democracy in their external relations

Cooperatives may be said to promote democracy in their external relations where they contribute to a more egalitarian, open and democratic society and also to the degree that they act as ‘schools of democracy’ in which members gain exposure to and experience with democratic procedures and participation.¹⁵ The extent to which cooperatives do so will again depend on a number of factors, such as their size and type, as well as their internal organisation.

Writing about cooperative communities, Thompson (1968) notes that the members ‘have not ceased to be members of the great general community in which they live. They take no monastic vows of voluntary seclusion from the world.… The sympathies of such communities will be enlarged…. By reason, by generosity, they will always seek to promote the public good’ (p. 434). In the contemporary literature, this is referred to as the ‘spillover effect’ in which the democratic practices of the cooperative help to produce more civic-minded citizens and a more participatory ethos.¹⁶ These effects include, as Pateman (1970, p. 74) puts it, ‘the development of the sense of political efficacy … the broadening of outlook and interests, the appreciation of the connection between private and public interest [and] the gaining of familiarity with democratic procedures and the learning of political (democratic) skills’. However, as she notes, obtaining these benefits requires ‘higher level participation’ (p. 74).¹⁷ In other words, the spillover effects are limited to those relatively few members who are able to participate at these higher levels, or the cooperative must be organised in such a way as to enable and encourage broad-based participation. Here again size is clearly a factor: it is simply easier to have high levels of participation in smaller organisations (e.g. through participatory, assembly style meetings for governance and management) than in large ones (which are more likely to rely on representative governance and professional management).

The ability of cooperatives to build local wealth – community wealth-building – can shift the dynamics of power within a community in a more democratic direction in a couple of ways. First, to the extent that wealth is equated with political power, they perform a democratising function by addressing inequalities of wealth. Second, the cooperative itself may be able to play an important political role as a local institution that can act in the interests of its members. As Flora and Flora (2013) make clear, in most communities, especially small cities like those found in Cameron County, business leaders play an important role in the political life of the community. The leaders of a successful cooperative may rightfully see themselves as community leaders, then, in a double sense – on the one hand as leaders of the community of cooperative members (who are themselves members of the community), and on the other hand as leaders of a significant business in the community who may have a broader impact through informal and formal social and political institutions. Finally, the dynamics of power will be affected to the extent that local ownership in the cooperative displaces what Flora and Flora (2013) refer to as ‘absentee ownership’ and the power that corporate directors with no direct connection to the community are able to exercise through their control of economic assets (p. 161–163).

In considering the external dynamics between a cooperative and a community, the size and type of a cooperative are again seen as significant. Consumer cooperatives, it may be assumed, are strongly connected to their community – after all, to the degree that they are successful, they are the community. All members of the community are welcome to become members, and the greater the correspondence between the community and the membership, the greater the success of the cooperative. Indeed, in the early part of the last century, consumer cooperative advocates such as Webb and Webb (1921) in Britain and Warbasse (1942) in the US advocated for what they called the ‘cooperative commonwealth’ in which all production and distribution would be organised through consumer cooperatives. Warbasse (1942) argues that, ultimately, the network of consumer cooperatives, by and for whom the nation’s production is organised, will ‘substitute cooperative democracy for the state’ (p. 137). With cooperatives coordinating and addressing distributional issues, the political frameworks would be recognised as superfluous and would simply wither away (ch. X).

In terms of the democratisation of their society, consumer cooperatives may have broader effects than worker cooperatives since they tend to be larger – that is, they have more members. However, they are likely to be more weakly democratic and less likely to have a direct impact on people’s lives, because members are less likely to have a strong sense of attachment to the cooperative, and because, unless it is comprehensive in its offerings and the only game in town, the cooperative may be just one of several retail establishments patronised by members. Furthermore, people more readily self-identify based on their employment (what they ‘do’), rather than what or how they consume, so the sense of community fostered by consumer cooperatives may be weaker.

Because worker cooperatives are more likely to operate in a more democratic manner (being generally smaller and having a stronger sense of shared interests) and more egalitarian in economic terms, they are more likely to contribute to the democratisation of society, although their relatively smaller size may limit the range of their effect. Further, because the workers themselves both benefit most directly (in an economic sense) and are able to exercise full control over the cooperative, they are, as Webb and Webb (1921) suggest, more likely to fall into the self-interested logic of the traditional capitalist model (p. 185–186), which would undermine their democratic potential. If worker cooperatives do not do this, it may reflect more of the effects of socialisation within the culture of the cooperative than a change in the structural conditions.

Some take it on faith that cooperatives – in particular worker cooperatives¹⁸ – do contribute to a more democratic society, but this cannot be taken for granted. Indeed, there is no particular reason why, understood as autonomous enterprises, cooperatives would be any different from any other sort of enterprise. What Gonzales (2010) says with respect to Italian worker cooperatives could be said about them more generally: ‘Though guided by strong ethical commitments to solidarity and democratic control, at heart, cooperatives are business enterprises dedicated to serving the collective though the private interests of their members’ (p. 230). As Kaswan (2013) discusses, an ideologically driven cooperative may develop an ‘oppositional character’ that may in fact alienate it from its local community (p. 281–282). The very intensity of democratic practices in the cooperative may lead members to develop a dismissive or apathetic attitude towards the more diluted democratic institutions of local, state and national government; furthermore, the failure of a cooperative because of excessive emphasis on ideology over solvency may lead members to becoming cynical or disenchanted with the idea of democracy more generally.

Levi and Pellegrin-Rescia (1997) use the concept of economic embeddedness to discuss the connection a cooperative may have with its community, identifying several conditions that can undermine this relation. Cooperatives that are organised in a top-down fashion may function in a paternalistic manner, and come to be seen as failing to serve the community’s interests. Well-intentioned reform projects can also fail because of what they call ‘cultural incompatibility’, which fails to address the real interests and concerns of the community affected. This is especially a danger where cooperatives are developed by government agencies, which may seek to develop cooperatives primarily as a way of addressing objectives defined by state actors rather than the community itself. Finally, cooperatives may start out fully embedded in the community, and may meet the formal criteria for cooperative enterprise, but then develop or operate in a way that fails to fulfil community needs (pp. 164–166).

3. Democratic tensions

It is apparent from this discussion that there are a number of important tensions when it comes to cooperatives as both democratic institutions themselves and as institutions able to democratise society. In the next section, some approaches to addressing these tensions will be discussed. Here, let me briefly summarise them.

From the perspective of Thompson’s theory, the essential element of democracy comes in individuals’ encounters with one another, and the way the cooperative shapes the character of that encounter. Both the type and size of the cooperative matter here. Type is significant because of the intensity of the encounter. In worker cooperatives, people spend a significant amount of time in one another’s company, and, while it may vary somewhat depending on the nature of the work, they may be expected to have a fairly high level of both interaction and interdependency. In consumer cooperatives, both the frequency of the encounters and their intensity – the level of interaction, engagement and sense of interdependence – will be less than for worker cooperatives, although in an all-volunteer consumer cooperative (in which the members provide all the labour) it may be nearly as high. In agricultural cooperatives, the frequency of encounters may be even less, although the degree of interdependency may be greater, particularly if they share equipment for production, harvesting and/or processing. Further, the sense of interdependence in producer cooperatives is enhanced by the fact that the quality of the products will reflect on the cooperative, not on any individual member, giving them nearly as strong a sense of interdependence as in worker cooperatives.

All of these factors are also affected by size. Indeed, it is in the size of the cooperative that some of the most serious tensions may arise. There is clearly an inverse relationship between size and both the frequency of interaction and the degree of interdependence. Moreover, assembly-style direct democracy can only effectively function in fairly small organisations (Dahl 1998, pp. 104–108). Increasing size also increases the complexity of management, which may lead to the introduction of non-member professional managers (Somerville 2007, pp. 10–12). This can lead to the problem of ‘managerialism’, or the development of powerful officials whose concerns and interests may be different from those of common members (Kaswan 2014, p. 187).¹⁹ Worker cooperatives are more likely to escape this problem, because the traditional method of elevating employees to management positions means that the managers are also worker-members. However, it is not unusual for worker cooperatives to hire professional managers, in which case this might develop into a concern.²⁰

Dahl refers to this tension as an inescapable dilemma, saying that, ‘The smaller a democratic unit, the greater its potential for citizen participation and the less the need for … representatives. The larger the unit, the greater its capacity for dealing with problems important to its citizens …’ (1998, p. 110). Cooperatives generally want to grow, in the first place for the benefits of growth (greater resources and resilience), but also because the larger they are, the better they are able to fulfil their mission and the greater social impact they may have. Greater size means more people engaged in the cooperative enterprise – although the intensity of their experience may be proportionally less. When a member’s participation in the democratic life of her cooperative is limited to deciding whom to vote for – or whether – in an election of the members of a board of directors, clearly the significance of the democratic element of membership is quite small.

Some of these tensions are quite similar with respect to the cooperative’s external relations. Worker cooperatives are likely to have a greater tendency to be more insular, less focused on benefiting the rest of the community in any direct way. This does not mean that they will not, of course. But, as Webb and Webb argued, worker cooperatives are still ‘capitalistic’ as they produce goods for profit – for exchange – even though in their case all profit is for the benefit of the workers themselves and not for outside investors (Webb and Webb 1921, pp. 182–187). But while they may not directly benefit the community, they can have an indirect effect, especially where it means that workers are able to earn higher wages than they otherwise would, and accumulate assets (in the form of equity in the cooperative) that they would not otherwise have access to. As compared with a traditional capitalist business in which wages are kept to a minimum and assets are exported to distant owners, this may have a significant impact in improving the community’s economic well-being. Furthermore, as was discussed above, the ‘spillover’ effect may be significant, as the political education of the workers may have a significant impact on their ability and their willingness to participate in the political life of their community. With respect to local asset-building, there can be no question that increasing size will benefit more workers and have a greater positive impact on the community. It may also reduce the insularity of the enterprise, as its concern for the community may grow in concert with its impact (although this is by no means assured). However, increasing size is likely to reduce the intensity of the interactions among the workers as well as their opportunities for participation in decision-making, thus reducing the spillover effect.

As compared with worker cooperatives, consumer cooperatives may seek to identify themselves very closely with their community. After all, the closer the correspondence between membership of the cooperative and membership of the community, the more successful the cooperative can be expected to be. What the cooperative loses in intensity it may make up in extensity. That said, the very low rates of participation experienced by REI, cited above, suggest that the intensity of participation may approach a vanishing point that makes its great extent rather meaningless.

The economic impact of a consumer cooperative can be expected to be much less than that of a worker cooperative. Typically, members do not accumulate equity in a consumer cooperative, so the only direct economic benefit they may enjoy is through possibly lower prices and their patronage refund. But because their patronage refund is directly related to their level of economic activity, and thus to their income, this will not affect existing inequalities in the community in a substantial way, although it will make some difference because it will mean that the net revenue of the operation is no longer being exported out of the community.

The central point, then, is that there is an intensity/extensity trade-off when it comes to the democratic character of cooperatives both internally and in their impact on their communities. Size appears to be the most significant factor. The smaller the organisation, the higher the level of interaction, interdependence and participation, and therefore the stronger effects. These members, then, might be expected to have a larger direct impact on their community. In larger organisations, the impact might be less intense and therefore more diffuse, but spread over a larger population. Cooperative type works hand-in-hand with size. Worker cooperatives, which are generally smaller, are likely to have a higher degree of internal interaction and interdependence, as well as democratic participation. That said, there is a clear and direct relationship between their size and their ability to promote the economic development of their community. But, however large they may be, they will almost always still be smaller than most consumer cooperatives. Unless quite small, consumer cooperatives cannot be expected to have a high degree of interaction or promote a sense of interdependence as do worker cooperatives. The degree of democratic participation is also likely to be less, and the economic impact on the community is likely to less.

4. Democratic networks of exchange

The question is whether there is a means by which some of these tensions can be resolved or abated, so the benefits can be experienced while avoiding many of the drawbacks. The answer to this may be in adopting a federated or network model of development. The classic example of this is Mondragón (2012), the large-scale worker cooperative based in the Basque region of Spain made up of 258 companies (p. 5). At the centre of Mondragón is the Caja Laboral, which in addition to providing financial services and asset management provides technical support for new and existing cooperatives. This federated structure enables Mondragón to take advantage of substantial size, with over €33 billion in total assets at the end of 2010 (Mondragón 2011, p. 10) while incorporating significant levels of democratic participation at all levels. Although there have been problems with worker apathy (Cheney 1999), particularly in the larger cooperatives,²¹ according to a recent account Mondragón owes much of its success to its democratic character (Arando et al. 2011, p. 242). However, Mondragón, while the most often cited, is not the only example of a successful network. In Québec, the Conseil québécois de la co-opération et de la mutualité (CQCM) has been effective in bringing together a large cooperative movement, organised in 11 regional development groups (Diamantopoulos 2011, p. 18). The CQCM has been remarkably effective at developing new cooperatives of various types, having ‘assisted the launch of over a thousand new cooperatives and created or maintained over 11,000 jobs in the past 15 years’ (Diamantopoulos 2011, p. 18).

A third model has recently been developed by the Democracy Collaborative and is centred around the Evergreen Cooperatives in Cleveland, Ohio. The so-called Cleveland model, based at least in general terms on the Mondragón system, is explicitly a model for the development of worker cooperatives in an impoverished community. The Cleveland Foundation provided seed funding, which was leveraged to obtain additional financing to develop the first three cooperatives – a commercial laundry, a solar energy installation and home weatherisation company, and a commercial greenhouse – that are connected to one another through a non-profit organisation that acts, much like Caja Laboral does for Mondragón, as a financial hub for the network, as well as providing basic administrative support, including in the crucial areas of human resources and training.

Thompson’s theory suggests that a consideration of the democratic character of these three models would take into account the way they structure the relationships among members, and particularly in the way, or the degree to which, the different elements engage in exchange with each other.

The first point has to do with size. Size, as the prior discussion makes clear, has a very significant effect on the democratic character of a cooperative, as increasing size means less intensive interactions among the members. But larger scale is required in order to have a significant impact on the economic conditions of a community. So, an advantage of a federal or network model is that, if their autonomy is protected, it may enable small cooperatives to thrive while enjoying the benefits of scale. That said, the advantages of large size are not available from the beginning, but develop as the network grows. Still, planners should note that, as the Cleveland model demonstrates, a network structure can be built into the model from the beginning. In other words, rather than developing cooperatives as independent enterprises, the network should be part of the design from the start.

The second point has to do with the relationship between developers and the community. The Cleveland model raises the challenge of paternalism, as the experts and specialists – professional managers – at the centre of the support organisation may come to exercise control in a way that undermines the democratic nature of the cooperatives. Traditionally, cooperatives come into existence because a group of like-minded individuals decide to pool their resources (as producers, consumers or workers) and share the benefits that come from their united efforts. It is, in a very direct sense, a bottom-up model of collective self-help. The Cleveland model, however, upends this, imposing the institutional structure from above and then bringing people into it – essentially hiring workers and then making them into owners. The creators of the model, who may not themselves be from the community, may inadvertently limit the degree to which community members, or members of the cooperatives themselves, are empowered, for fear that their vision may be upset.²² When it comes to extremely low-income communities, this fear may not be unreasonable: many people, and especially those whose lives have been marked by a long and deep history of profound poverty, disempowerment and subjugation, may not be used to engaging in democratic practices like those used in most cooperatives. The democratic ethos must be learned, and habits of subordination unlearned. In deeply impoverished communities, the temptations of short-term gain at the expense of long-term success may be difficult to deny. Yet the success of the cooperative depends on the members accepting this sort of long-term vision, even at the expense of their short-term interests.

It should also be recognised that a federation is not the same as a network. Federation implies a coming together of autonomous units and does not imply (necessarily) any interaction between those units beyond what may be in the interests of the members qua members. A network, on the other hand, implies a higher level of interaction, even some level of integration. The Evergreen Cooperatives in the Cleveland model is more of a federation – there are not many synergies between a commercial laundry and a commercial greenhouse, for example – while the CQCM has more of the features of a network. Diamantopoulos (2011) notes that the CQCM built ‘inter-cooperative involvements at the regional level [developing] cross-sectoral movement cohesion, vision, and agency [and creating] a unified, modern, and developmental cooperative bloc’ (p. 18). By fostering intercooperative exchange, the CQCM has a stronger democratic orientation, as it promotes a greater degree of mutuality than does Evergreen. Mondragón, for its sake, has integration in some senses, as some of its units provide support or are suppliers to other units, and they support one another when they face financial difficulties.

5. Conclusion

Places such as Brownsville and Cameron County suffer from systemic problems. Systemic change is required to address these problems. Traditional development strategies make it too easy for large corporations to take advantage of the desperation of impoverished communities to extract resources and leave the community worse off than before. As a community wealth-building strategy, cooperatives ensure that the resources of the community stay in the community, and at the same time they offer the potential of addressing the political deficits as well as the economic ones. Empowerment for cooperative members may come in a number of different forms, as the democratic practices in the cooperative may give them valuable skills as well as a sense of political efficacy, and through wealth-building it may help address the problems of inequality that undermine democratic systems in many communities.

For those who seek to promote development that not only addresses the economic needs of a community but that also wish to empower it through the development of democratic institutions, it is tempting to consider cooperatives as a powerful solution that can have substantial effects, both economically and politically. And so they may well be. However, as I have tried to show in this paper, this is not guaranteed.

The network and federation models offer some valuable options for addressing the tension between intensity and extensity for democratic practices. The real key lies in identifying ways to attain the highest possible levels of interaction and interdependence within the cooperatives, even as the network or federation grows and expands. The CQCM and Mondragón both offer attractive models for large-scale cooperative systems, but many of their strengths took many years to develop; they did not start out as they are now. The Cleveland model provides a clear idea of a way to get started, although not every community is fortunate enough to have a community foundation with as deep pockets as the Cleveland Foundation.

Even if imperfect, there is little question that an extensive system of cooperatives – or even a single cooperative – can have a positive effect on a community. Indeed, the UN referred to these effects in their resolution establishing the IYC, noting that cooperatives ‘promote the fullest possible participation in the economic and social development of all people, including women, youth, older persons, persons with disabilities and indigenous peoples, are becoming a major factor of economic and social development and contribute to the eradication of poverty’ (General Assembly UN 2010, p. 1).

Acknowledgements

An earlier version of this paper was presented at the Western Political Science Association meeting in Hollywood, California, on 29 March 2013. Section 1 and the material on William Thompson more generally were drawn from my recent book Happiness, Democracy and the Cooperative Movement: The Radical Utilitarianism of William Thompson (SUNY Press, 2014). The paper was much improved thanks to the feedback provided by two anonymous reviewers. It also benefited from the support of the Beyster Fellowship Program at the Rutgers University School of Management and Labor Relations and the Foundation for Enterprise Development. In particular, I would like to thank Joseph Blasi, Mary Ann Beyster, Joan Meyers, Erik Wright Olsen and Craig Borowiak for their valuable support and insights.

Additional information

Notes on contributors

Mark J. Kaswan

Mark J. Kaswan’s work in applied political theory focuses on political economics, democratic theory and the cooperative movement. His book Happiness, Democracy and the Cooperative Movement: The Radical Utilitarianism of William Thompson was published by SUNY Press in June 2014.

Notes

1. The Environmental Kuznets Curve (EKC) and endogenous growth theory provide models for understanding why this might be the case. See, for example, Pearce and Barbier (2000, ch. 2). Roseland and Soots (2007) use the example of rapid development in China to demonstrate the problem (p. 153–154).

2. The term was coined by the Democracy Collaborative, based at the University of Maryland, which maintains the Community Wealth website: www.community-wealth.org. See also Dubb (2005).

3. On sustainability from a community development perspective generally, see Roseland (2012).

4. See, for example, Gonzales and Phillips (2013).

5. Thompson (1996) was somewhat apologetic about being a member of the ‘idle classes’, but at the same time saw himself as an intellectual labourer who made a productive contribution to society through his efforts (p. 1).

6. Thompson’s (1830) work, Practical Directions, lays out detailed plans for such communities, including the schedule of crop rotation, construction of the housing (which would include central heating) and even health-related concerns, including contraception. Thompson’s plan was specifically endorsed by the first Co-operative Congress in 1831 as the model for the development of cooperatives in the British Isles (Co-operative Congress 1831).

7. Much of what follows is based on the cooperative sector in the US. There are some structural differences elsewhere, but none of these are particularly significant. What may be different is the distribution of membership among the different categories. Although I have not seen any firm analysis of this question, my sense is that the consumer cooperative sector may be stronger in the US and UK than elsewhere.

8. See Kaswan (2014, ch. 6) for a discussion of the historical connection between Thompson and the modern cooperative movement.

9. An exception is agricultural cooperatives where voting rights are connected to the volume of produce delivered by each member, but even here there are limits to how big of a differential there can be.

10. Some people mistakenly use the term ‘direct democracy’ to describe this. However, direct democracy is not necessarily participatory. For example, a state-wide referendum is an example of direct democracy, as the people vote directly on the measure and not through representatives. However, it is not participatory, as they may have little or no opportunity to participate in the process, other than casting their ballot. Further, participatory democracy is not necessarily direct, as it may involve members of the public having an extensive consultative role, with final decision-making in the hands of elected representatives.

11. This will be discussed somewhat more below, but for now it is sufficient to point out that one of the cooperative principles, cooperation among cooperatives, seeks to foster this sort mutual support, but among the cooperatives themselves, not necessarily among the individual members of the cooperatives.

12. Although he thought a community could be started with a smaller number, around 200–300 (Thompson 1830, p. 25).

13. For example, only a little more than one per cent of REI’s 4.7 million members participated in a recent election for members of the board of directors (Walker 2011).

14. To my knowledge, no research has been done to date on member participation rates in the governance of cooperatives.

15. I focus exclusively on consumer and worker cooperatives in what follows, mostly because most producer cooperatives are agricultural and rural, and this paper is primarily concerned with redevelopment in urban areas. While they may have significant social effects (they may be largely responsible for preserving the institution of the family farm), these are less broad in scope. For considerations of space it seems prudent to remove them here.

16. See, for example, Schur (2003).

17. It should be noted that she is discussing participation in industrial firms, not cooperatives.

18. See, for example, Wright (2010).

19. See also Davis (1999).

20. For some worker cooperatives this is a benefit, as they may be concerned with concentrating too much power ‘in one set of hands’ (NCF 2006, p. 20).

21. It should be noted that there are also issues with non-member employees, particularly in facilities outside of Mondragón’s home base in Spain, but this falls outside the current discussion.

22. This may not be limited to developers. After all, the founders or long-time members of a cooperative may be resistant to change in a similar way.