Economy

3 Ways To Have Economic Success Without Greedy Corporations and Huge Wealth Disparities

Some business communities have achieved significant impact and scale, broadly distributing wealth rather than concentrating it.

We know there's something seriously wrong with our economy. Our system of economic rules and incentives was developed, and continues to be molded, by large multinational companies and implemented by politicians eager do whatever it takes to raise money and ensure that they never have to leave office.

This unholy symphony, orchestrated by the US Chamber of Commerce, working hand-in-hand with other trade associations, has ensured that the rich keep getting richer to the astounding point that America now ranks as a less equal country than Egypt and Tunisia. (According to the CIA's World Fact Book, which ranks countries in terms of how "equally" wealth is distributed, the US is the 42nd most unequal country in the world.) This system moves us ever closer to such severe inequality that social disruption is an increasing risk. (Consider the London riots against the fact that, in Great Britain, one million people from the ages of 16 to 24 are officially unemployed, the most since the deep recession of the mid-1980s.)

Yet, it doesn't have to be this way.

Examples of business communities that have achieved significant impact and scale, broadly distributing wealth rather than concentrating it, exist all across the globe under a header one might best describe as economic democracy. One thinks of Mondragon in Spain, Legacoop in Italy and the Co-operative Group in the UK. The Evergreen Cooperative in Ohio is our own homegrown American version.

Having recently returned from Mondragon, I had the opportunity to experience firsthand the principles and values that underlie their practice of economic democracy. In our now post-industrial age that has turned people into disposable assets, mere tools at the service of capital, it is breathtakingly hopeful to experience business that chooses to honor the essence of humanity over the accumulation of wealth in service of capital.

The Promise of Worked-Ownership Models

Mondragon, Legacoop, the Co-operative Group, and the Evergreen Cooperatives have structured their businesses around a socio-economic arrangement in which the enterprise is democratically controlled.

This limits the primacy of the profit-maximization motive that currently drives the way most businesses engage with the market. Though the form and structure of control varies -- think worker cooperatives, consumer cooperatives, employee stock ownership programs (ESOPs) and credit unions -- these businesses are organized to benefit a group of stakeholders, primarily worker owners, rather than outside investors.

This shared ownership helps diversify rather than concentrate wealth, rooting the value it generates in communities and keeping assets and resources from being transferred away from local communities and low-wage employees to multinational corporations and their owners.

Cooperatively owned businesses can range from small-scale local companies to multi-million-dollar global businesses, such as Organic Valley, the $500 million leader in the organic dairy industry; Nationwide Mutual Insurance, an 80-year-old Fortune 500 company, with more than $135 billion in statutory assets; and Land O'Lakes, Inc., a farmer-owned food and agricultural cooperative with $12 billion in sales.

Throughout the world, cooperatives employ more than 100 million people and have over 800 million members. In the U.S., nearly 14 million employees participate in 9,650 employee stock ownership programs at public and private firms with combined assets of over $925 billion.

According to Worker Cooperatives for the 21st Century by Nicholas Luviene, Amy Stitely and Lorlene Hoyt, U.S. cooperative businesses serve over 120 million members, or four in 10 Americans. The top 100 co-ops generate more than $150 billion in revenues, and there are more than 72,000 cooperative establishments in the U.S. providing over 2 million jobs. Two-hundred-and-fifty-five telephone cooperatives provide service to 964,000 households; 6,400 housing cooperatives provide homes for 1.5 million households; and 30,000 U.S. credit unions have 91 million members and assets in excess of $760 billion.

The numbers prove that worker-owned models aren't merely a wishful possibility, they are enduring and sustainable realities for workers and consumers.

Lessons from European Models

In Europe, Italy's Legacoop, Spain's Mondragon and the UK's Co-operative Group multi-sector cooperatives have been able to both reach significant scale and demonstrate long-term sustainability.

Legacoop

Legacoop, founded in 1886 in Milan, now has over 15,000 member cooperatives and employs 485,000 people, and represents businesses in every industry from banking and insurance to retailing, construction, agriculture, travel and manufacturing. Legacoop's role is to advocate, represent, protect cooperative values, build the movement by developing new businesses, and work for laws that provide preference to cooperatives, nationally and internationally.

Italian co-ops have engaged in a decentralized strategy, creating "flexible manufacturing networks" comprised of the highly skilled work forces of small and mid-sized manufacturers. This approach has helped Italian cooperatives take advantage of labor flexibility and, as Tim Huet pinpoints, "leverage niche markets created by the volatility of the global market." Huet is director of the Center for Democratic Solutions, a nonprofit in San Francisco that advises co-ops. He explains, "Cooperatives are particularly adept at fostering the critical relationships because of their collaborative cultures. The small size of the productive plants in flexible manufacturing networks facilitates robust democracy for cooperatives involved."

Legacoop's accomplishments, particularly the strength the movement has exhibited in the face of the impending European economic meltdown, and its deep commitment to values that seem vibrant despite a century of extraordinary growth, are to be deeply admired.

The Co-operative Group

Based in the UK for more than 150 years, the Co-operative Group is owned and democratically controlled by its members and is now the largest consumer cooperative in the world, with over six million members.

The Co-operative Group has 117,000 employees and operations that include 4,500 U.K. retail outlets serving around 21 million customers per week. In 2009, gross sales at the Co-operative Group grew 31 percent from £10.4 billion to £13.7 billion. (See Johnston Birchall's 2011 book, People Centered Business; Co-operatives, Mutuals and the Idea of Membership, to understand the history, impact and global scope of this movement.)

Mondragon

Mondragon, founded in 1956, now holds 33.3 million euros in assets and employs over 85,000 people internationally.

Solidarity is at the heart of the Mondragon model. Without it they would not survive as businesses, or as a community. Solidarity is an expression of commitment to the common good. It is given the highest priority. Solidarity insists upon democratic methods in all aspects of business and management and in the process of dialogue that precedes every major decision.

Solidarity is specifically expressed in compensation where the maximum salary differential from the lowest to the highest paid worker is now 7-to-1. Never in Mondragon's history has any worker ever been laid off for financial reasons.

Mondragon's values follow those of the cooperative movement in general. Business in America would benefit greatly by following them. Some of these values include:

  1. Democratic Organization. Every important decision is made through a democratic process. Sometimes this is slow and painful, but the principle is never violated.
  2. Sovereignty of Labor. Mondragon ensures that capital never drives decisions that are detrimental to workers.
  3. Participatory Management. You are expected to participate. While no one is forced to, increased responsibility and promotion are based on participation.
  4. Social Transformation. This is a global aspiration to transform the relationship between business and society into one that makes capital subservient to humanity, the environment and the well-being of all.
  5. Education. Second to mission and values, education emerges as the second most amazing aspect of the Mondragon community. They understand the transformative power that lies within education.

Economic Democracy as a New Foundation for Civic Life

Building upon the foundation of economic democracy we have already developed in the US is our best hope of restraining the negative forces of the marketplace that have been unleashed to generate increasing environmental devastation, social inequity and the end of democracy as we were as a country founded to practice.

Cooperatively owned and democratically managed business provide our citizens with what is often their first real experience of democracy, an experience that hopefully they will then bring into life outside work and an increasing engagement with civic life.

Resources and examples abound to support the development of economic democracy; however, a central organizing entity has yet to emerge in the US. Worker cooperatives remain separate from producer cooperatives and cooperatives in general don't see their natural alignment with ESOPs and even not-for-profits.

Building on the foundation that already exists to create a social, economic and political movement is perhaps the greatest opportunity that lies ahead.

For more information, visitCommunityWealth.organdAmerican Sustainable Business Council

Jeffrey Hollender is co-founder and former CEO of Seventh Generation. He is the author of "The Responsibility Revolution: How the Next Generation of Businesses Will Win," and five other books. He is a board member of Greenpeace US and Verite and co-founder of the American Sustainable Business Council. To learn more visit his website or Twitter (@jeffhollender).