GLOBAL ECONOMICS. 

Time for Alternative models?

Conservation. Environment. Sustainability. Steady State.

Profit. Resources. Exploitation. Exhaustion.

Reuse. Recycle. Post Growth. Stability. Use Less.

The World Economic Forum concluded its latest gathering in Davos, Jan 27 2013.

There seemed to be an increasing acceptance of the consequences of the exploitation of raw materials: 

that  resources like iron ore, coal, petroleum, timber, fish, will run out, soon, at current levels of consumption;    that finished goods are consuming iron, steel, aluminium, copper, tin, rare earth metals, as well as plastics at rates that cannot be maintained.;    that greater efforts should be made to reuse, and recycle, all products and reduce the system of  exploiting raw materials, producing new products;                 that mass production and constant growth is leading to the destruction of the natural environment.

We know that we operate a capitalist system based on the private ownership of capital goods and the means of production, with the creation of goods and services for profit, capital accumulation, competitive markets, and  price systems. [Wikipedia]

During the Forum in Davos the debate about conservation and sustainability and environmentalism, and its implications for global economics, had been stimulated by the arguments of a number of think-tanks such as the New Economics Foundation,  the Ellen Macarthur Foundation, the Product-Life Institute, the Bio-Mimicry Institute, and the Centre for Steady State Economics, as well as the Post Growth Institute.

In a recent newsletter, The Post Growth Institute argued for 

 Transformative Research by Amelia Byrne. 

She argued that if our assumptions aren’t true…most of us today have grown up surrounded by a culture that believes that the earth has an unlimited capacity to provide us with whatever we humans might desire – more cars, more electronic gadgets, cheap meat, and so on. Not only that, but we have organized the way that our society works around this belief. The global economy, to which most of our livelihoods are tied, is based on the assumption that endless economic growth (which usually equals an increase in resource use and environmental degradation) is not only possible, but also desirable and even necessary. This kind of thinking has led us to think that unlimited capacity is more likely than peak supplies.

What if these fundamental assumptions of our society – endless growth, and endless resources – aren’t actually true?      It seems more and more apparent that continual economic growth is not only not possible, but that we in fact must “de-grow” (use less) in order to bring our activities in line with planetary realities. This is a daunting thought because how we currently make our livings, and therefore provide food and shelter for our families, is often reliant on the economic growth model.

Sometimes this reliance is literal,  primary – for example, owning a business that sells luxury goods: the business prospers the more you sell and does better when people have extra money to spend as a result of economic growth or higher credit limits. 

 This dependency on the growth model can also be secondary. For example, working for a company, an institution or clients that see the world from within the economic growth paradigm. In this case, one’s job, funding or income is dependent on the fact that you continue to do your work in a way that promotes, or at least doesn’t threaten this fundamental faith.

Turning our minds to the task.  As an (applied) researcher Amelia Byrne falls  into that second category. Presently many researchers are not officially supported in the work they do that is outside of (and challenging to) the economic growth paradigm. Participating in such research can be threatening to one’s career, whether one works in the corporate world, the non-profit sector, or even the academic one. What’s more, the financial underpinning of the modern university often depends on economic growth.  Endowment investments are based on a growing economy.  And, as governments throughout the world are attempting to reduce expenditures in light of tough economic times, publicly funded research money is cut.  This further narrows the scope of research, since research funding  becomes increasingly dependent on the private sector.

But, what if this wasn’t the case? What if researchers were in fact supported and publicly encouraged to address the great challenges we face?

This possibility isn’t unthinkable.  Bill McKibben, for example, writes about Cuba  which was forced away from industrial farming in the early 1990s with the fall of the Soviet Union — their source of cheap oil. Cuba was able to transition to more-or-less local, organic agriculture in part because of the fact that the country’s best scientists and researchers started focusing their work on how this could be done, and done better. So, McKibben points to the question: what if research money in the United States started to be put into organic agriculture research rather than industrial agriculture methods as has been the case for the last decades?

Or more generally, what if researchers, in many different disciplines, started putting their energy into addressing post-growth/de-growth questions rather than doing research that supports the growth paradigm? Where this has happened, there have been attempts to render ‘post - growth’ more acceptable .

The different pressure groups and think-tanks that offer critiques of the current capitalist economic system have presented  concepts of  de-growth  and environmentalism under different names. For example, the Ellen Macarthur Foundation at Davos talked about the ‘circular economy’:   An opportunity to rethink our economic future

The Ellen MacArthur Foundation report on the Economics of a Circular Economy invites readers to imagine an economy in which today’s goods are tomorrow’s resources, forming a virtuous cycle that fosters prosperity in a world of finite resources.

This change in perspective is important if we are to address many of today’s fundamental challenges. Traditional linear consumption patterns (‘take-make-dispose’) are coming up against constraints on the availability of resources. The challenges on the resource side are compounded by rising demand from the world’s growing population. As a result, we are observing unsustainable overuse of resources, higher price levels, and more volatility in many markets.

As part of their strategy for Europe 2020, the European Commission has chosen to respond to these challenges by moving to a more restorative economic system that drives substantial and lasting improvements of our resource productivity. It is our choice how, and how fast, we want to manage this inevitable transition. Good policy offers short- and long-term economic, social, and environmental benefits. But success in increasing our overall resilience ultimately depends on the private sector’s ability to adopt and profitably develop the relevant new business models.

The Ellen MacArthur Foundation’s report paints a clear picture: our linear ‘take-make-dispose’ approach is leading to scarcity, volatility, and pricing levels that are unaffordable for our economy’s manufacturing base.

As a compelling response to these challenges, the report advocates the adoption of the circular economy, and provides an array of case examples, a solid framework, and a few guiding principles for doing so. Through analysis of a number of specific examples, the research also highlights immediate and relatively easy-to-implement opportunities. On the basis of current technologies and trends, it derives an estimate of the net material cost saving benefits of adopting a more restorative approach—more than $ 600 billion p.a. by 2025, net of material costs incurred during reverse-cycle activities. The corresponding shift towards buying and selling ‘performance’ and designing products for regeneration should also spur positive secondary effects such as a wave of innovations and employment in growth sectors of the economy, whilst increasing Europe’s competitiveness in the global marketplace. Many business leaders believe the innovation challenge of the century will be to foster prosperity in a world of finite resources. Coming up with answers to this challenge will create competitive advantage.

While The Foundation’s first report has taken a European perspective, its lessons are relevant at a global level. It will not be possible for developing economies to share the developed world’s level of living standards and provide for future generations unless we dramatically change the way we run our global economy.

The Foundation’s report offers a fresh perspective on what a transition path to a circular economy at global scale could look like. It is time to ‘mainstream’ the circular economy as a credible, powerful, and lasting answer to our current and future growth and resource challenges.

 New Economics Foundation, and the Centre for the Advancement of the Steady State Economy,[CASSE]  promote the concept of the ‘Steady State Economy’.

The  “steady state economy” originated from ecological economics, most notably the work of Herman Daly. The steady state economy is often discussed in the context of economic growth and the impacts of economic growth on ecological integrity, environmental protection, and economic sustainability.
Economic growth is generally indicated by increasing gross domestic product (GDP). Economic growth entails increasing population x per capita consumption, higher throughput of materials and energy, and a growing ecological footprint. 
The size of an economy may undergo one of two trends: growth or recession. Otherwise it is stable, in which case it is a “steady state economy.”  Therefore, “steady state economy” connotes constant populations of people (and, therefore, “stocks” of labor) and constant stocks of capital. It also has a constant rate of throughput; i.e., energy and materials used to produce goods and services.
Within a given technological framework these constant stocks will yield constant flows of goods and services. Technological progress may yield a more efficient “digestion” of throughput, resulting in the production of more (or more highly valued) goods and services. Conflicts with ecological integrity and environmental protection occur long before a steady state economy is maximized.
 Neither economic growth nor economic recession  are sustainable; therefore, the steady state economy remains the only sustainable prospect and the appropriate policy goal for the sake of sustainability.

Rules for a Steady State Economy

Good economic policies strive to achieve societal goals like sustainability and fairness with the least amount of impingement on individual freedoms. Following this principle, achieving a steady state economy requires adherence to only four basic rules or system principles that are hard to argue with:

(1) Maintain the health of ecosystems and the life-support services they provide.

(2) Extract renewable resources like fish and timber at a rate no faster than they can be regenerated.

(3) Consume non-renewable resources like fossil fuels and minerals at a rate no faster than they can be replaced by the discovery of renewable substitutes.

(4) Deposit wastes in the environment at a rate no faster than they can be safely assimilated.

Friends of the Earth want to identify a ‘green economy’, and develop a ‘sustainable economy’. . As an organization, it wants to fight the oppression and exploitation of native communities, and work for systemic changes that make the polluters pay, and end all subsidies for polluting industries such as coal and iron mining, oil drilling, or fracking, chemical manufacture of pesticides and herbicides. It promotes a cleaner, low carbon economy, encouraging investment in clean alternatives. At the moment, Friends of the Earth is running a campaign to force corporations such as Samsung and Apple, that make electronic goods, to admit how many rare earth minerals they use, and acknowledge how they destroy sensitive environments, as in Indonesia.  For example, Smartphones sold by best-selling brands almost certainly contain tin from Indonesia where mining is devastating forests and farmland, coral reefs and many communities, a Friends of the Earth investigation reveals today, Jan 2013.  Our research shows that Samsung and Apple deal with companies that use tin mined on Bangka island in Indonesia. They may not have known this, nor about the devastating effect of mining on the island. Tin is used as solder in all phones and electronic gadgets. Around a third of the world's tin comes from Bangka and neighbouring island Belitung.

'Mining for Smartphones: the True Cost of Tin' reveals:

·             Dangerous and unregulated tin mining on Bangka
Police figures show that in 2011 an average of one miner a week died in an accident: that is, more than 52 miners a year.

·             Coral and sea life threatened
Silt from tin mining is killing seagrass eaten by turtles, and coral reefs, driving away fish and ruining fishermen's livelihoods.

·             Farmers struggling to grow crops
Soil has become acidic after the destruction of forests for tin mining. 

When we asked Samsung and Apple if they used tin from Bangka, they neither confirmed nor denied it.

Friends of the Earth's Executive Director Andy Atkins said: "Though Apple and Samsung may not have realised it, our research shows that mining tin to make both companies' smartphones may come at a terrible cost to people and the environment."

Samsung sold around 95 million smartphones in 2011, and Apple around 93 million. Analysts say there are likely to be more than 2 billion smartphones in use within the next 3 years. Experts say that innovative design and better reuse of old phones could cut demand for tin.

Of course,  whatever is said at any World Economic Forum gatherings, the principal corporations such as Shell, Esso, BP, Walmart, Toyota, Volkswagen, Glencore,  Apple, Samsung, Ford, General Electric,  operate within a ‘capitalist economy’ based on annual growth, designed for mass production with low labour costs and economies of scale, generating  maximum profits.

This growth  business model provides for the accumulation of wealth by an elite, [11 million people]  and the poverty of the majority [6.9 billion people]. The capitalist system that has operated for hundreds of years has meant that poverty is normal, and that growth benefits only the owners of capital [based on findings of World Wealth Reports].

DIFFERENT CONCEPTS OF 'ECONOMY':

Different versions of economic development are all based on different notions of environmentalism, expressing the need to conserve and preserve the environment and the biosphere, while at the same time maintaining profit levels.

As we have already considered, the latest version, a circular economy, explores the possibilities of designing production and industry and products so that they are reusable with limited waste. Growth is no longer  the key to development. The key is a ‘steady state’ in which products are designed to maintain production levels, and conserve the environment.

Circular Economy: an industrial economy that is, by design and intention, restorative and in which material flows are biological nutrients designed to re-enter the biosphere safely, and technical materials which are designed to circulate at high quality without entering the biosphere; an economy in which today’s goods are tomorrow’s resources, forming a virtuous cycle that fosters prosperity in a world of finite resources.

                                                                             

Ecological economy is based on the interdependence and evolution of human economies and natural ecosystems over time and space. This model treats the economy as a sub-system , proposing to preserve natural capital.

Environmental economics

This approach undertakes theoretical and empirical studies of the economic effects of national and local environmental policies around the world

The Green Economy is one that results in improved human wellbeing and social equity, reducing environmental risks and ecological scarcities.

Sustainable Development

A mode of human development in which resource use aims to meet human needs, and preserve the environment so that these needs can be met now, and in the future.

The Brundtland Commission said: development that meets the need of the present without compromising the ability of future generations to meet their own needs.

Some politicians will argue that these different economic models will require government legislation and regulation.

Global Socialism may be necessary: it is a system of social ownership of the means of production and cooperative management of the economy with common ownership , and state ownership This definition assumes that officers of government will ‘look after’ the environment, and not destroy it. But this assumption  is not always wise! There are instances, as in Brazil  recently in which Governments have been directly involved in selling forestry and farmlands to the oil companies or other multi-national corporations. 

The International Cooperative Alliance thinks that the future lies with a ‘cooperative economy’.

Their alternative approach is cooperative economics. A cooperative is a company owned and democratically controlled by its members. Its members can be producers, or consumers or employees of its products and services [ http://ica.coop].

1. Co-operative societies must have an open and voluntary membership. According to the ICA's Statement on the Co-operative Identity, "Co-operatives are voluntary organisations, open to all persons able to use their services and willing to accept the responsibilities of membership, without gender, social, racial, political or religious discrimination."  
 Anti-discrimination : to discriminate socially is to make a distinction between people on the basis of class or category. Examples of social discrimination include racial, religious, sexual, sexual orientation, disability and ethnic discrimination.  A Co-operative society should not prevent anyone willing to participate from doing so on any of these grounds. However, this does not prohibit the co-operative from setting ground rules for membership, such as residing in a specific geographic area or payment of a membership fee to join, so long as all persons meeting such criteria are able to participate if they so choose.
Motivations and rewards
Given the voluntary nature of co-operatives, it requires a motivation to encourage people to participate. Each person's motivations will be unique, and will vary from one co-operative to another, but will often be a combination of the following:
            Financial - Some co-operatives are able to provide members with financial benefits.

• Quality of life – serving the community through a co-operative because doing service makes one's own life better - is perhaps the most significant motivation for volunteering. Included here would be the benefits people get from being with other people, staying active, and above all having a sense of the value of ourselves in society that may not be as clear in other areas of life.
• Giving Back – many people have in some way benefited from the work of a co-operative, or more generally, and volunteer to give back.
• Altruism – volunteering for the benefit of others.
• A sense of duty – some see participation in community as a responsibility that comes with citizenship – in this case they may not describe themselves as volunteers
• Career Experience - Volunteering offers experiences that can add to career prospects.                

2. Democratic member control   Co-operative societies must have democratic member control. “Co-operatives are democratic organizations controlled by their members, who actively participate in setting their policies and making decisions. Men and women serving as elected representatives are accountable to the membership. In primary co-operatives, members have equal voting rights (one member, one vote) and co-operatives at other levels are also organised in a democratic manner.”

 3. Member economic participation is one of the defining features of co-operative societies. Co-operatives are enterprises in which “Members contribute equitably to, and democratically control, the capital of their co-operative. At least part of that capital is usually the common property of the co-operative. Members usually receive limited compensation, if any, on capital subscribed as a condition of membership. Members allocate surpluses for any or all of the following purposes: developing their co-operative, possibly by setting up reserves, part of which at least would be indivisible; benefiting members in proportion to their transactions with the co-operative; and supporting other activities approved by the membership.”  This enshrines democratic control over the co-operative, and how its capital is used.

 Limitations on member compensation and appropriate use of surpluses  Unlike for profit corporations, co-operatives are a form of social enterprise. Given this, there are at least three purposes for which surplus funds can be used, or distributed, by a Co-operative.

• “Members usually receive limited compensation, if any, on capital subscribed as a condition of membership.”
• “Developing their co-operative, possibly by setting up reserves, part of which at least would be indivisible;” in other words, the surplus can be reinvested in the co-operative.
• Benefiting members in proportion to their transactions with the co-operative;” for example, a Consumers' Co-operative may decide to pay dividends based on purchases (or a 'divvi').
• “Supporting other activities approved by the membership.”

4. Autonomy and independence                                                                                                   Co-operative societies must be autonomous and independent. According to the ICA's Statement on the Co-operative Identity, “Co-operatives are autonomous, self-help organizations controlled by their members. If they enter into agreements with other organizations, including governments, or raise capital from external sources, they do so on terms that ensure democratic control by their members and maintain their co-operative autonomy.”

 5. Education, training, and information
The fifth  principle states that co-operative societies must provide education and training to their members and the public.  “Co-operatives provide education and training for their members, elected representatives, managers and employees so they can contribute effectively to the development of their co-operatives. They inform the general public – particularly young people and opinion leaders – about the nature and benefits of co-operation.”
6. Cooperation among cooperatives
The sixth  principle states that co-operatives cooperate with each other. “Co-operatives serve their members most effectively and strengthen the co-operative movement by working together through local, national, regional and international structures.”
 7. Concern for community
The seventh  principle states that co-operative societies must have concern for their communities. “Co-operatives work for the sustainable development of their communities through policies approved by their members.”

Whatever approach you take, the destruction of the natural materials must stop; along with the emission of green house gases. If they are not stopped, the natural environment will be exhausted, and polluted, and climate change will continue.

Herman Daly declares that in place of the growth economy he would put a steady-state economy.  At the moment, we are subject to growth mania - literally not counting the costs of growth. One of the most popular arguments against limiting growth is that we need more growth in order to be rich enough to afford the costs of cleaning up pollution and discovering new resources. Economist Neil Jacoby says, "A rising GNP will enable the nation more easily to bear the costs of eliminating pollution" (1970, p. 42). Yale economist Henry Wallich makes a similar point: The environment will also be better taken care of if the economy grows.
Kenneth Boulding has for many years been making the point that Gross National Product is largely Gross National Cost, and has never been taken seriously.
 But most advocates of the steady state accept and proclaim the absolute necessity of limits to inequality in the distribution of both wealth and income. Indeed, many people who have long favored less inequality in the distribution of wealth on ethical and political grounds have reached the same conclusion on ecological grounds. As Wallich so bluntly put it in defending growth, "Growth is a substitute for equality of income. So long as there is growth there is hope, and that makes large income differentials tolerable" (1972). We are addicted to growth because we are addicted to large inequalities in income and wealth.  These inequalities result in the control of  finances and investments by a significant minority of 1225 billionaires, supported by
11 million $millionaires.
Unfortunately, this means that the revision of global economies, and the development of alternatives may well be mediated by those whose vested interests are in the capitalist system!

Sources

Czech, B. 2006. Steady State Economy. Encyclopedia of Earth. Eds. Tom Tietenberg et al., National Council for Science and the Environment, Washington, DC.

Czech, Brian and Herman Daly. 2004. The Steady State Economy – What It Is, Entails, and Connotes. Wildlife Society Bulletin 32(2): 598-605.

Daly, Herman. 1991. Steady-State Economics. Island Press, Washington, DC. 286pp.

Daly, Herman and Joshua Farley. 2003. Ecological Economics: Principles and Applications. Island Press, Washington, DC. 450pp.

Mill, John Stuart. 1909. Principles of Political Economy. William J. Ashley. Library of Economics and Liberty.

Daly, Herman. 2005. “Economics in a Full World.” Scientific American, September 2005,100-107.

Global Footprint Network. 2009. Data and Results Website. http://www.footprintnetwork.org.

McKibben, Bill. 2007. Deep Economy: The Wealth of Communities and the Durable Future.

Henry Holt and Company, New York, NY.

Rockström, J. et al. 2009. “A Safe Operating Space for Humanity.” Nature 461, 472-475.

World Wildlife Fund. 2010. Living Planet Report.

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.

COOPERATIVES, 
PAST, PRESENT, FUTURE ?

Cooperative Alternatives.

At the moment, January 2013, we live in a world of capitalist enterprise, in which most people are poor, and where less than 1% of the global population controls most of the global wealth.

1226 people are multi-billionaires, with $4.6 trillion

11million people have access to $42 trillion out of the total annual GDP of $60trillion.

And 7 billion people survive on less than $10 a day, of which 1.5 billion survive on less than $1 a day, and 1 billion die of hunger!

The present global society is not fair nor equitable nor equal nor just.

It is elitist.  A plutocracy managing a capitalist economy for their own benefit.   The owners and shareholders get maximum bonuses.The workers with minimum wages, and maximum prices for the consumers.

Many years of capitalism has enriched a minority. Yes, it has led to the creation of technological innovations that have totally changed ways of life!

However, if there is to be the creation of a fair and just global society, the wealth will have to be redistributed leading to  a transformation of elitist capitalism.

Instead of describing how this elitist capitalist society functions, it is time to begin to look at alternative systems, and to make alternative choices.

As we have witnessed in the USA during December 2012, it is no good standing at the top of the ‘fiscal cliff’ hoping that no one falls off. Serious efforts must be made by voters and politicians to alter the criteria of ‘tax and spend’.

The very wealthiest must stop complaining about the possibilities of personal taxation, and make efforts to support the poor with social benefits. Or even provide regular employment and a living wage!

If  7 billion people are to thrive on a living wage of say $10 an hour, the wealth of the elite plutocracy must be shared.  The wealth of the world should be managed in cooperation, and the enterprises could be organized as cooperatives in which the efforts of all are equally rewarded.

There are many cooperative enterprises across the world, particularly in agriculture, and retail e.g. Cooperative Wholesale Society, UK; Euro-Coop; Lega-Coop, Italy;  Coop, Switzerland;  MIGROS  Switzerland; Coop-City in New York; Best Western Hotels; Italian Social Coops; AMUL in India; FELDA in Malaysia, along with many others as listed by the International Cooperative Alliance:  

Go to

http://ica.coop

http://2012coop/en/global-300   

The ICA in their most recent report, 2012, declared that up to 1 billion people are actively involved in cooperatives, with the largest 300 cooperatives generating $1.6 trillion.

But this does not alter the fact that most of the wealth generated by capitalist enterprises, $60 trillion GDP 2011, has greatly enriched a minority, 11 million people out of 7 billion. Cooperative enterprises have not been so successful, and their presence has been ignored. The University of Wisconsin has reported that over the last few years, cooperatives in the USA have declined due to the running battles between capitalists and socialists where the arguments centre on whether business is for the enrichment of the few or the social benefits of the many?

From the mid-nineteenth century, mutual organisations in  Europe tried to  embrace the ideas of cooperation and sharing, and taxes and social enterprises  as economic enterprises: firstly amongst trades people, and later in cooperative stores, educational institutes, financial institutions and industrial enterprises. The common thread of ‘mutuality’ (enacted in different ways, and subject to the constraints of various systems of national law) is the principle that an enterprise or association should be owned and controlled by the people it serves, and share any surpluses on the basis of each members' cooperative contribution (as a producer, labourer or consumer) rather than their capacity to invest financial capital.

The cooperative movement has been fueled globally by ideas of economic democracy, a socioeconomic philosophy that suggests an expansion of decision-making power from a small minority of corporate shareholders to a larger majority of public stakeholders.
A cooperative is a legal entity owned and democratically controlled by its members. Members often have a close association with the enterprise as producers or consumers of its products or services, or as its employees.
In some countries, e.g. Finland and Sweden, there are specific forms of incorporation for cooperatives. Cooperatives may take the form of companies limited by shares or by guarantee, partnerships or unincorporated associations. In the UK they may also use the industrial and provident society structure, according to the Industrial and Providence Act 1965.  In the USA, cooperatives are often organized as non-capital stock corporations under state-specific cooperative laws.  Cooperatives often share their earnings with the membership as dividends, which are divided among the members according to their participation in the enterprise, such as patronage, instead of according to the value of their capital shareholdings (as is done by a joint stock company). Cooperatives are typically based on the cooperative values of "self-help, self-responsibility, democracy and equality, equity and solidarity".
If there are to be fair shares of resources and wealth, the future is to be ‘Cooperative’! We will need to  return to the ideas of cooperative socialism . The Rochdale Principles are a set of ideals for the operation of cooperatives. They were first set out by the Rochdale Society of Equitable Pioneers in Rochdale, England, in 1844, and have formed the basis for the principles on which co-operatives around the world operate to this day. The Rochdale Principles focus on  co-operative economics.
The original Rochdale Principles were officially adopted by the International Co-operative Alliance (ICA) in 1937 as the Rochdale Principles of Co-operation. Updated versions of the principles were adopted by the ICA in 1966 as the Co-operative Principles and in 1995 as part of the Statement on the Co-operative Identity:
1.  The first of the Rochdale Principles states that co-operative societies must have an open and voluntary membership. According to the ICA's Statement on the Co-operative Identity, "Co-operatives are voluntary organisations, open to all persons able to use their services and willing to accept the responsibilities of membership, without gender, social, racial, political or religious discrimination."
2. The second principle states that co-operative societies must have democratic member control. According to the ICA's Statement on the Co-operative Identity, “Co-operatives are democratic organisations controlled by their members, who actively participate in setting their policies and making decisions. Men and women serving as elected representatives are accountable to the membership. In primary co-operatives, members have equal voting rights (one member, one vote) and co-operatives at other levels are also organised in a democratic manner.”
3. Member economic participation is one of the defining features of co-operative societies, and constitutes the third Rochdale Principle in the ICA's Statement on the Co-operative Identity. According to the ICA, co-operatives are enterprises in which “Members contribute equitably to, and democratically control, the capital of their co-operative. At least part of that capital is usually the common property of the co-operative. Members usually receive limited compensation, if any, on capital subscribed as a condition of membership. Members allocate surpluses for any or all of the following purposes: developing their co-operative, possibly by setting up reserves, part of which at least would be indivisible; benefiting members in proportion to their transactions with the co-operative; and supporting other activities approved by the membership.” Co-operatives are a form of social enterprise.”
4. The fourth of the Rochdale Principles states that co-operative societies must be autonomous and independent. According to the ICA's Statement on the Co-operative Identity, “Co-operatives are autonomous, self-help organizations controlled by their members. If they enter into agreements with other organizations, including governments, or raise capital from external sources, they do so on terms that ensure democratic control by their members and maintain their co-operative autonomy.”
5. The fifth principle states that co-operative societies must provide education and training to their members and the public. According to the ICA's Statement on the Co-operative Identity, “Co-operatives provide education and training for their members, elected representatives, managers, and employees so they can contribute effectively to the development of their co-operatives. They inform the general public – particularly young people and opinion leaders – about the nature and benefits of co-operation.”  Indeed organising  a cooperative enterprise can be complicated, requiring knowledge of the law, accounting procedures, business planning, marketing strategies, community investment, working  a democracy, resolving differences by negotiation, writing papers and proposals, working with officials, serving on boards of directors, recording minutes of meetings, and decisions. A wide range of new skills and knowledge are to be learnt.
The sixth of the Rochdale Principles states that co-operatives cooperate with each other. According to the ICA's Statement on the Co-operative Identity, “Co-operatives serve their members most effectively and strengthen the co-operative movement by working together through local, national, regional and international structures.”
The seventh of the Rochdale Principles states that co-operative societies must have concern for their communities. According to the ICA's Statement on the Co-operative Identity, “Co-operatives work for the sustainable development of their communities through policies approved by their members.”
These seven Rochdale principles are bought into play in creating a cooperative venture, whether it be a grocers shop or dairy or corn farm or wheat farm or market garden, a credit union or utility provision. . These seven principles help make a ‘cooperative’ different from a ‘capitalist’ enterprise: with its members working together, and decisions being made together. A cooperative is not focused on making the maximum profit. It is concerned with providing affordable products to local members.  
Marvin Schaars [1978] concludes that “If I were to name the principles, not practices if you please, which I feel any organization must include in its set-up to be a true cooperative, be it a grocery store company, a rural electric cooperative or a cooperative milk plant, I would list only three. These I call the "hard-core" underlying principles of cooperation. They are: . Services at cost to member-patrons;  Democratic control by member-patrons; Limited returns on equity capital.

The legal definition of a cooperative varies greatly.  

It is correct that there are many different types of cooperatives.

A Retailers' cooperative  is an organization which employs economies of scale on behalf of its members to receive discounts from manufacturers and to pool marketing. It is common for locally owned grocery stores, hardware stores and pharmacies to be cooperative businesses rather than individuals.

A workers cooperative or producers cooperative is a cooperative,  that is owned and democratically controlled by its "worker-owners".

A volunteer cooperative is a cooperative that is run by and for a network of volunteers, for the benefit of a defined membership or the general public, to achieve some goal such as a social service.

A consumers' cooperative is a business owned by its customers. The world's largest consumers' cooperative is the Co-operative Group in the United Kingdom, which offers a variety of retail and financial services. 

A housing cooperative is a legal mechanism for ownership of housing where residents either own shares (share capital co-op) reflecting their equity in the cooperative's real estate, or have membership and occupancy rights in a not-for-profit cooperative (non-share capital co-op), and they underwrite their housing through paying subscriptions or rent.

Members of a building cooperative (in Britain known as a self-build housing cooperative) pool resources to build housing, normally using a high proportion of their own labour. When the building is finished, each member is the sole owner of a homestead, and the cooperative may be dissolved. This collective effort was at the origin of many of Britain's building societies, which however, developed into "permanent" mutual savings and loan organisations, a term which persisted in some of their names (such as the former Leeds Permanent)

A utility cooperative is a type of consumers' cooperative that is tasked with the delivery of a public utility such as electricity, water or telecommunications services to its members. In the case of electricity, cooperatives are generally either generation and transmission (G&T) co-ops that create and send power via the transmission grid or local distribution co-ops that gather electricity from a variety of sources and send it along to homes and businesses.

Agricultural cooperatives or farmers' cooperatives are cooperatives where farmers pool their resources for mutual economic benefit. Agricultural cooperatives are broadly divided into agricultural service cooperatives, which provide various services to their individual farming members, and agricultural production cooperatives, where production resources such as land or machinery are pooled and members farm jointly.  Agricultural supply cooperatives aggregate purchases, storage, and distribution of farm inputs for their members. By taking advantage of volume discounts and utilizing other economies of scale, supply cooperatives bring down members' costs. Supply cooperatives may provide seeds, fertilizers, chemicals, fuel, and farm machinery. Some supply cooperatives also operate machinery pools that provide mechanical field services (e.g., plowing, harvesting) to their members. Agricultural marketing cooperatives provide the services involved in moving a product from the point of production to the point of consumption. Agricultural marketing includes a series of inter-connected activities involving planning production, growing and harvesting, grading, packing, transport, storage, food processing, distribution and sale. Agricultural marketing cooperatives are often formed to promote specific commodities.                                                                                                                                Credit unions are cooperative financial institutions that are owned and controlled by their members. Credit unions provide the same financial services as banks but are considered not-for-profit organizations and adhere to cooperative principles.  The UK Co-operative Group includes both an insurance provider CIS and the Co-operative Bank, both noted for promoting ethical investment.                                                                                                       Cooperative wholesale society.  According to cooperative economist Charles Gide, the aim of a cooperative wholesale society is to arrange “bulk purchases, and, if possible, organise production.”                                                                                                    Cooperative union.   A second common form of cooperative federation is a cooperative union, whose objective (according to Gide) is “to develop the spirit of solidarity among societies and... in a word, to exercise the functions of a government whose authority, it is needless to say, is purely moral.”   Co-operatives UK and the International Cooperative Alliance are examples of such arrangements.

Cooperative political movements.  In some countries with a strong cooperative sector, such as the UK, cooperatives may find it advantageous to form political groupings to represent their interests. The British Cooperative Party, the Canadian Cooperative Commonwealth Federation and United Farmers of Alberta are prime examples of such arrangements.

Schaars  [1978] proposed that ‘a cooperative is a business, voluntarily owned  and controlled by its member-patrons and operated for them and by them on a non-profit or a cost basis.

According to Gide, [1904] ‘a cooperative is a group of persons pursuing common economic, social, and educational aims by means of a business’.

Legislators have wrestled with the problem of  profit or social ends for many years. Yet no definite conclusions are in sight. Even co-op scholars and researchers differ among themselves concerning the definition of a "true cooperative."  Nevertheless, there is general agreement with Schaars's conclusion that a "true"cooperative is one which provides; (1) service at cost, (2) democratic control by member-patrons and (3) limited returns on equity capital.

It is significant that, at this time, share-owning capitalist enterprises are normal in USA, Europe, Russia, Australia, Brazil, China, India, Japan, and across the world. All these enterprises have share-holders. If they are successful, the profits are paid to the shareholders. If the principal shareholders are family investors [such as the Gates family, or Apple, or Tata or Branson or Buffet, and the rest of the Forbes 500,] they will receive the dividends and bonuses agreed by the Board of Directors, and reap the maximum profits. We have to remember that the success of such capitalist enterprises depends upon paying the workers low wages and charging maximum prices to the consumers: that is, capitalist exploitation. Whatever problems there are in defining a cooperative, it is most important that cooperative enterprises are owned and controlled by members, patrons, workers, consumers as well as investors. The benefits and profits of the cooperative enterprise are shared by all those involved, not just the elite investors.

I would suggest that a ‘true cooperative’ provides services and products at prices agreed by the democratic votes of member-patrons in the light of the democratically agreed returns on equity capital. Every one with an interest in the operation of the cooperative enterprise is involved in making decisions about practices, products  profits, and benefits.

The United Nations has declared 2012  the Year of the Cooperative.
The United Nations Year of the Cooperative will express:  "Cooperative Enterprises Build A Better World" and highlight the key aspects of cooperative enterprises which allow them to fulfill this rule.

Cooperative enterprises build a better world.

Cooperative enterprises are member owned, member serving and member driven

Cooperatives empower people

Cooperatives improve livelihoods and strengthen the economy

Cooperatives enable sustainable development

Cooperatives promote rural development

Cooperatives balance both social and economic demands

Cooperatives promote democratic principles

Cooperatives and gender: a pathway out of poverty

Cooperatives: a sustainable business model for youth

REFERENCES/ 2013
Marvin Schaars: Cooperatives, Principles and Practices 1978
Frank Groves: Philosophy of Cooperation 1985
www.un.org/en/events/coopsyear
http://social.un.org/coopsyear
http://ica.coop
www.cooperative.coop
www.cooperatives-uk.coop
www.peoples.coop/cooperative
www.en.wikipedia.org
www.infoplease.com
www.encyclopedia.com
www.uwcc.wisc.edu
www.thenews.coop:cooperativenews
http://neweconomics.org
www.positivemoney.org
http://news.bbc.co.uk/democracylive
www.rurdev.usda.gov
www.ace.coop