ALTERNATIVE CHOICES: COOPERATIVE ENTERPRISES

When there is little economic growth, there is high unemployment in Europe, the USA, and all other capitalist countries in the G8/G20/G70. The International Labour Organisation reported today, Jan 22 2013, that there are 197,000,000 unemployed people across the world.

The EU Minister for Industry suggested in January 2013 that more and more individuals should start up their own businesses rather than depend on finding jobs with existing enterprises.  It would be a good idea for governments to sponsor more groups to start up cooperative enterprises.

It will be a major initiative for the richest countries like Kuwait, Qatar, Abu Dhabi,[the United Arab Emirates], with their petro-dollars, to follow the example of the Yunus group and Grameen Banks, and set up trust funds to  micro-finance programmes to fund local businesses and to give impetus to cooperative start-ups.

Given that joint stock corporations enrich their primary shareholding investors, [that is 11 million people out of 7 billion,] and their efforts exploit the resources of the earth to exhaustion, the only viable future is a cooperative economy.

An aspect of a cooperative economy is that enterprises are developed in the light of local needs. It is unlikely that their efforts will destroy the local environments and render their lives impossible!

Another aspect of cooperative initiatives is that they involve groups of members, not single entrepreneurs. So whether it be a shop, market gardens, dairy farms, cereal farms, farm machinery, a public utility like a phone service or internet provider, water and sanitation, clothing and shoes manufacture, cotton farms, and sheep herds, pharmacies, community schools, medical services; white goods, auto-parts like Mondragon; hotels like Best Western; community housing like Coop City in New York, among many other alternatives, every body involved puts up money and effort and skills and time. Everyone  is a member, equal to fair shares. The members of a cooperative work together as a collective, making decisions about the management and organization of the cooperative. One member, one vote. Cooperatives are designed to satisfy the needs of their members, not to enrich a minority of shareholders.

So how would you go about starting up a cooperative?  For any group of cooperators, they must have a good project, that they know could be established and be viable. The members could establish a new cooperative or re-organise local enterprises as cooperatives, based on the ICA principles, and establish a network of cooperatives,  including a  whole range of industrial , financial, retail, social services. In fact, there is no reason why any enterprise could not be organized and operated as a cooperative. What is interesting is that the most attention, [media/business reports], is paid to corporations not cooperatives. The World Economic Forum in Davos is currently obsessed with capitalism not cooperation.

Once the plan for a cooperative has been drawn up, the members must decide about funding. They need to determine how they are going to get the money required to operate their enterprise. Where is the money going to come from?  Of course, some of the money will be generated by the donations of the members. Indeed, if the enterprise is small scale, this may be enough. Or as it develops, micro-finance credit will provide support. Any cooperative that utilizes machinery, trucks, workers, premises, sales, distribution,  most of the funding will come from investors, banks, and credit unions as grants and loans in the form of new money. The initial costs of starting up a cooperative, or any enterprise for that matter, are far greater than can be supported by one person. The start up costs will be the same for a capitalist enterprise as for a cooperative. The fundamental, and significant, difference is that the one is controlled by shareholders, and the other is controlled by every member.

When new cooperative enterprises can be sponsored by governments and their agencies, the cooperators will have to apply for  start-up help, funding, along with micro-finance and grant-aid, and low interest loans and trust funds. From the start, the cooperative members have to decide how to market the enterprise, and the format of the publicity, as well as who was going to write and design the application brochures or web-sites or videos for ‘YouTube’ or Vimeos. These marketing activities are best done by members

as the more money that is spent on outside experts, the higher the initial costs would be. Whenever possible it is important to utilize the resources of the cooperative. The brochures can be designed and developed by the cooperative team. But specialists like publishers and printers will have to be used at a cost. Of course, the printers could be a cooperative or part of the network of cooperatives.

It is worth remembering that the initial members will be experts in the services offered by the cooperative, skilled in retail or agricultural or social or financial or manufacturing activities which will form the basis of the co-op. As the cooperative expands, a wider range of members will take part including workers, customers, suppliers. It is essential that all cooperatives are organized as a cooperative democracy - one member, one vote. There are no shareholders forming boards of directors.  There are members forming management committees.

It is important for all members to realize that cooperative enterprises are subject to specific legislation and financial regulation. All the members will have to become familiar with the laws relating to public liability, and the regulation of finances for cooperative enterprises.

Legally speaking, what is a cooperative? It is an organization that is legally owned and mutually controlled by those who make up the cooperative. Members are most often producers, consumers, or employees related to the enterprise.  Cooperatives can exist in a variety of legal forms. They can be incorporated and limited by guarantee, shares, or partnerships, or they can be unincorporated. To be ‘incorporated’ the cooperative is registered as a legal entity with limited liability.  If a company is ‘unincorporated’ it means that there is unlimited liability: that is, the owners are liable for the assets, debts and properties and products of the corporation.  In some European countries, such as Sweden and Finland, cooperatives can be incorporated, limited companies or unincorporated associations. While in the United States, state-specific laws govern the legal structure of cooperatives as either unincorporated structured limited liability companies, partnerships, or non-capital stock corporations or in the case of incorporated co-ops, the variations allow for varying degrees of return and amounts of control, most often based on members' participation in the co-op.

[ http://EzineArticles.com/5110083].

In the UK, in January 2012, Parliament introduced the new UK Coop Bill, aiming to rationalise all previous legislation in to a coherent system and to facilitate the creation of cooperatives in the future. Clearly, all members of a cooperative are required to become familiar with all these different laws relating to cooperative enterprises. It could be argued that a significant step would be to make the legal matters simpler! As it is at the moment, all cooperatives must be in contact with corporate lawyers.

‘Incorporation’ requires the cooperative corporation to specify how it will be organised.

While all members contribute initial funding as a membership fee, their power in the enterprise will not depend on their money donations but on their status as a member.  One member, one vote.

It may be that there will be individual investors. But they will not be share-holders,they will be members of the cooperative.

In order to concur with the laws of incorporation, the cooperative management committee will organize the cooperative so that the members will have a clear picture of  objectives, and procedures and purposes. The management structure should enable the enterprise to operate at the lowest costs, by using the skills of the members and linking with partners as part of a cooperative network. There is no place for a chief executive officer nor a board of directors. The important aspect of the cooperative is that it is run by the members in committee. What sort of members will there be? organisers, suppliers, managers, customers, workers, investors, lawyers, accountants. The workers and organizers cannot be expected to work for nothing. They will be paid a fee or a salary for their time, or wages and expenses, as agreed by the unions. Customer members will be subject to discounts according to how much they spend. Investors, along with all members, will receive a dividend each year linked to patronage, and profits.

Given that the profits are distributed to all members, rather than a handful of share-holders, no one member will become richer than any other members. It is not part of the ethos of the cooperative that the few benefit at the expense of the many. The enterprise will have a finance section which keeps a tally on revenue, payments, and dividends.

As I have mentioned before, small enterprises may not require complex support mechanisms. But medium to large corporations will certainly have to develop a business model, a management structure, and support mechanisms in order to function. Whatever their size, all cooperatives will have to accord with the legal demands.

All cooperatives will need the services of banks, not only to lend money, but also to provide retail services such as deposits, money transfers, credit cards, payments. It is recommended that cooperatives do not use commercial banks, but credit unions.

A Credit Union is a profit sharing, democratically run financial co-operative which offers convenient savings and low interest loans to its members. The members own and manage their credit union themselves. The three main aims of a Credit Union are:

• To encourage its members to save regularly.
• To provide loans to members at very low rates of interest.
• To provide members with help and support on managing their financial affairs (if required).

Commercial Banks, like Barclays, Lloyds, Santander, Morgan Stanley, Goldman Sachs are committed to investment schemes that are designed to make as much profit as possible for their shareholders. As we saw in 2008, when these banks put all their monies into speculative investments, and the schemes collapsed, the banks went bankrupt. Some Credit Unions did go ‘bust’. They had been tempted to put their members savings into speculative schemes that failed!                                                                                 

 If  the members of a cooperative decide to develop ‘a savings and loan’ scheme, it is possible for the cooperative to be a profit-making enterprise and a profit sharing credit union.                                                                                                                                    At this point, it is important to understand that any financial company that is in the business of lending money / providing loans / giving credit /creating debt will be concerned to create new money. The savings of the members/customers provide the assets that form the collateral that secure the loans. The banks or credit unions or building societies are licensed to create new money by making credit entries in their customers balance sheets. For example, when a bank or credit union has GPB10 million in savings, it may be entitled to lend GPB100million, according to the rules of the Central Bank.[At the time of the financial crash 2008, some banks were creating GBP700 million in debt.] These loans are new money, created out of nothing. They exist as digital entries on the corporate balance sheets. Currently, cooperatives, as well as joint stock, corporations are dependent upon this system of fractional reserve banking to buy materials, and sell products, and pay workers.

How can our cooperatives be environmentally friendly?                                                             Recently, I was watching a documentary on BBC World News concerning the emerging environmental movement in China. The protagonists were most concerned that the priorities of the current Central committee of the government, and most of their new enterprises, were development, expansion, and profits. Care of the environment was a marginal concern. The evidence in China of the pollution of the environment, and the industrial poisoning of the workers, is alarming. However, it was reported that today more local authorities are placing higher priorities on the care of the environment.                                                                                                                      Today in the USA, EU, UK, as well as China, all enterprises must take into account the ways in which they are poisoning the environment, destroying the biosphere, polluting the atmosphere.                                                                                                                                                                        How can cooperatives take care of the environment?                                                                      First of all, it must be high on the list of priorities and targets of the business plan.  Questions must be asked about how the raw materials are produced? Grown? Processed? Are they being transported half way round the world? Only to be shipped back as finished goods? Does the company discharge waste materials into local waterways? Does it monitor rates of pollution? Is there any attempt to limit pollution of the atmosphere? Does the cooperative explore the possibilities of generating and using carbon-free energy? By means of wind power? Solar power? Tidal power?  Or if this is not possible, can they control and monitor and ration coal powered electricity? Oil powered or gas powered generators?                                                                  Of course, many enterprises do not monitor simply because it is too complicated, and too difficult to do without the efforts of the government. This underlines that protection of the environment involves a change of mind by all organisations across the world. Cooperative corporations, whether  small/medium/large, will need to examine how they deal with waste products; investigate how their suppliers care for crops and products? These matters will be most important for dairy farms and creameries, as well as for beef cattle ranches, rice paddies, wheat farms.  It is well recorded that cattle generate significant amounts of methane - an element of the air pollution mix of ozone.  It is too often ignored that Agriculture is a primary source of pollution. Animals, crops, wetlands, fermentation, as well manure, add to the pollution of  local waters and ground water, and the biosphere with the creation of ozone, with the mix of methane, nitrous oxide, halocarbons, carbon dioxide. Agricultural cooperatives can be a major source of greenhouse gases, and need to be monitored and supervised.                                                                                                            Many Cooperative enterprises start up as shops and food stores. Today, they could  be vegetarian and  encourage local grown products in gardens, allottments, and market gardens. They can pioneer the development of vegan diets and encourage the reduction of meat consumption, and thereby limit the generation of methane and manure.                                                                                                             Large scale cooperatives like Mondragon produce such things as auto-parts, electrical goods. Other industrial coops produce textiles, clothes, shoes. Customers have become obsessed with new, fashionable items, from mobile phones to shirts and dresses. Cooperatives could begin to plan for the use of recycled materials. For example, there is enough iron and steel in the world to provide recycled products. What is more, items can be designed to be recycled rather than thrown away. If a cooperative company does throw products away, where are they thrown? How are they prepared as waste? Is there any attempt to render products recyclable?                                                                                                                               What is perfectly clear is that our atmosphere is being polluted with greenhouse gases; that our global climate is undergoing warming, and more extreme climatic events; 

that our lands are being covered with waste products, and our rivers are being poisoned with sewage and untreated industrial waters.                                                                                                       Cooperatives can be a force for change and the protection of our environments.