Worker cooperatives: democratising the economy

Inclusive Economy05 Jun 2013Jose Itzigsohn

An inclusive economy requires economic democracy. The development of a solidarity economy should be a key element.

An inclusive economy is one that affords all people the possibility of achieving a dignified life including decent jobs, access to health services and education, and a clean environment. It should allow people to develop to the best of their abilities. Such an economy can develop only in a society in which people participate in shaping their economic lives, that is, it requires economic democracy. One key component of economic democracy is the development of a solidarity economy.

A solidarity economy is based on economic units owned and managed by their workers. These include cooperatives, associations of small producers, local or regional economies characterized by degrees of cooperation between businesses and communities, local money initiatives, community initiatives for the delivery of services, and the like. The arguments developed here have many points in common with those proposed by Milford Bateman in his blog post on the social and solidarity economy (SSE).

A solidarity economy can make a number of important contributions to building an inclusive economy. First, it offers people the possibility of participating in shaping their work life, an area of social life that is not democratic for most people. Second, it creates job opportunities for people who are not part of the world of formal work or who have been displaced from the labour market by the “creative destruction” of the market. It reconnects people with the world of work and with their social contexts, undoing the social isolation caused by exclusion from the labour market. Third, the solidarity economy is committed to the employment of its members, generating stability in local communities. Its goal is to allow workers a decent life rather than capital accumulation for its own sake. Moreover, since the solidarity economy is committed to employment it can help sustain economic demand. Finally, since the solidarity economy is tied to its surrounding communities, it is potentially more open to internalizing environmental externalities.

Admittedly, the solidarity economy operates within the market economy and its units have to generate earnings to pay wages and reinvest in the economic unit and in the community. For that reason solidarity economy units have to be competitive and sometimes expand to be able to survive. But the criteria of profitability of solidarity economic organizations are different from those of corporations since they do not have to produce profits or dividends for shareholders and they do not pay outrageously large salaries to their managers, making them more capable of dealing with the ups and downs of the market. As Milford Bateman points out in his blog in this discussion, cooperatives are increasingly recognized as a very socially and economically efficient form of enterprise.

There are many examples of the achievements of solidarity economies. The Mondragon cooperatives in the Basque country have maintained a vibrant local economy based on workers’ ownership and participation in managing their workplaces (Flecha and Santa Cruz 2011, pdf). In Cleveland, USA, groups within civil society decided to promote the development of workers cooperatives to fight local unemployment. Central to this initiative is the fact that economic development based on cooperatives owned by workers who are city residents are there to stay. In India, the Self Employed Women Association (SEWA) has used cooperatives to empower women in the informal sector. In Argentina the solidarity economy has developed through the recuperation of enterprises by their workers, who have demonstrated that they can successfully manage their enterprises.

There are many examples of successful solidarity economies, but in most cases they are isolated grassroots initiatives. A challenge for building an inclusive economy is to scale up these isolated initiatives into a thriving economic sector that presents an alternative economic rationale. There are a number of possible public policies that can help achieve this: providing assistance in forming cooperatives, creating easy lines of credit or tax breaks, contracting solidarity economy enterprises to supply goods or services, or promoting cooperation between local solidarity economic units. As Bateman asserts, some governments in Latin America have started to develop policies to promote the solidarity economy. It is worth mentioning in particular the Argentinean reform of its bankruptcy law so that workers of bankrupt enterprises have the opportunity to use the debts owed to them to buy the enterprise and transform it into a worker-owned and managed cooperative.

Admittedly, the solidarity economy alone is not all that there is to an inclusive economy, as it is only one sector – and so far a very small one – within the larger economy. But development of the solidarity economy should be one of the pillars of an inclusive economy.