Cooperatives and Community Economic

DevelopmentExploring Cooperatives

Economic Democracy and CED – PA &WI

Philadelphia, June 13, 2012

Jessica Gordon Nembhard, Ph.D.jgordonnembhard@gmail.com

Themes

• Need and Marginalization• Champions, Affinities Trust

Social Energy• Financing and capitalization

schemes• Democratic practice, learning• Linkages – coops, community,

enabling institutions• Multiple sectors• Sustainability and “Failure”

Cooperatives - CED Tool• Cooperatives address market failure,

and are both anti-poverty strategies and community building strategies.

• Cooperative ownership helps address underdevelopment and economic isolation and marginality.

• Co-ops anchor the local economy.• Keep the benefits of capital &

production re-circulating among those who produce them, service them, and need them.

Economic Challenges, Cooperative

SolutionsChallenges• Market Failure• Export of Capital• Predatory lending• Unemployment• Poor quality education• Housing Crisis• Poor nutrition

Solutions• Consumer

Coopera.• Community-

based• Credit Unions• Worker

Cooperatives• Co-op Schools,

Continuous Education Principle

• Co-op Housing• Co-op Grocery

Ten Reasons Why

Cooperatives Promote

Community-Based Economic

Development

1. Anchoring and Re-circulation of resources

2. Education, Orientation, Training – continuous education

3. Job Creation and meaningful work

4. Economic and Environmental Sustainability

5. Address market failure and marginalization – need, African Americans, women, Immigrants, youth

6. Joint ownership7. Building wealth – individual and

cooperative asset ownership, and community wealth; challenge of low-wealth community

8. Democratic participation – social efficiencies, participatory budgeting, consensus building

9. Leadership development – women, youth

10.Civic Participation – transparency, engagement

Jessica Gordon Nembhard (c) 2009 8

• Mortgage from CU; affordable local produce & supplies; anchored in community

•Mortgage from CU; materials from store; more civically involved; more home ownership

•Wages used to buy goods in store; mortgage from CU; dividends increase residents’ assets; anchored in community

•Mortgages to local businesses & residents; savings of residents; donations to community

Credit Union Worker Co-op

Co-op StoreHousing Co-

op

Co-op linkages

Barriers?• Capitalization and access to capital• Adequate and proper orientation and

training (cooperative econ , co-op management ed, conflict resolution)

• Distrust and Ideology• Excessive Competition, - what is the

biz plan?• Racism and Patriarchy• Class and Gender inequality• Deep analysis, description not

enough • Politics and policy

Ten Reasons Why

Cooperatives Promote

Community-Based Economic

Development(details)

1. Re-CirculationCo-ops (especially worker) re-

circulate resources in a local economy and leverage local resources:

• Local wages are used in the community and for goods and services that benefit the community.

• Surplus is returned to members, who live in the community and invest in the community or leverage their local dollars out in the world.

Recirculation cont’d• Co-ops often buy local - use

local suppliers whose activity originates in the community and whose resources also recirculate.

• Co-ops deliberately direct dollars to the community and support community development ($ donations, in kind contributions of meeting space and supplies, etc., volunteer hours).

2. Education and Training

Co-ops promote education and training through:

• training about how to run a business and read an income and expense statement;

• industry training;• training in meeting facilitation and

democratic participation; • a well trained board of directors; and• public education using orientation

brochures, information boards, and product labeling.

Continuous Education

• Many began with study circles.

• Skills developed from cooperative ownership are transferable to other economic, political and social situations.

• Training is continuous over the member’s participation in the cooperative.

3. Job Creation• Co-ops create local jobs and

meaningful work;• keep jobs in the neighborhood,

creating new jobs as the co-op grows, supporting local businesses;

• value and promote team work;• provide job ladder opportunities;

and• a self management environment.

Meaningful Work• Co-ops (especially worker)

often lead their industries in providing living wages, and wages higher than industry standards;

• high quality work with a variety of benefits; and

• establish democratic control over income and work rules.

4. Economic & Environmental Sustainability• Co-operatives provide economic

stability by providing members with a viable community-based business; and

• environmentally friendly products and services.

• As residents, co-op members care about the environment and their working conditions.

• Triple bottom line – profit, human & social capital, environmental capital.

• Greensaw Design and Build

5. Address Market Failure and

Marginalization• Co-ops produce affordable and high quality goods and services usually because the market does not provide them – healthy food, sustainable energy, non-predatory lending, quality job.

• Marginalization forced subaltern groups such as African Americans to find alternative economic solutions.

African American Co-op Dev.

• In response to marginalization, segregation and discrimination, African Americans practiced economic cooperation and established mutual societies and cooperatives.

• Free and enslaved Blacks pooled their money to buy their own and their family members’ freedom.

• “Freedmen” established beneficial societies and mutual aid companies to help cover costs of illness and death.

AA Economic Independence

• More currently African American have used cooperatives when they needed more income, could not find work, and/or needed products that were not being supplied.

• Freedom Quilting Bee: share cropping insufficient and exploitative, political repression, need control over land and economic independence.

Immigrant Women• Immigrant women have also created cooperatives to help them survive, maintain their own culture, and balance work and family life.

• Cooperative Economics for Women, WAGES.

6. Joint OwnershipJoint ownership means • Pooling scarce resources; • Leveraging resources; • Reducing individual risks;

and• Profit sharing.• Addresses low income,

capital flight – and lack of experience.

7. Building Wealth• In addition to generating

income, cooperatives contribute to asset building and wealth accumulation.

• Stable jobs, equity in the business, patronage refunds and other returns on their investment do provide member-owners with wealth, although this is often difficult to document.

Community-Based Asset Building

• Democratic joint ownership and cooperative ownership can be viewed as a type of community-based asset; and

• contribute to community asset building – augmenting individual member’s assets and increasing the wealth of the company and the community.

• Beginning to document and measure this.

8. Democratic Participation

• Being a decision maker in the business, having a say in cooperative governance has personal and business benefits.

• Research has found that both participation and ownership have positive effects on productivity:–lower turnover and absenteeism

–higher worker satisfaction.

Social Efficiencies• Social efficiencies are derived from democratic participation.

• Team work, inter-cooperation combined with self help and self management increase productivity and job satisfaction.

9. Leadership Development

• Democratic participation and self management develop leadership skills in co-op members.

• Some cooperatives deliberately encourage members to alternate leadership roles and share leadership to enhance team work.

• Co-op members are found to assume leadership in other settings as well.

Women’s Leadership• Cooperatives “afford women

a number of important benefits, including empowerment, leadership training, learning opportunities not available in traditional work settings, and increased self-esteem.” (Weiss & Clamp)

Youth Development• We are also finding that

involving youth in cooperative business development in schools increases their motivation to stay in school, helps them to earn money for college, and develops leadership.

10. Civic Participation

• Democratic participation and decision-making, as well as skill and leadership development often spill over into other arenas,

• co-op members become more active in civic organizations and politics.

• Take on leadership roles in community organizations.

• Participate in policy advocacy.

Transparency• In addition, co-op members and

employee owners become used to the transparency and accountability in their economic organizations (open book policies, one member one vote, shared management, etc.).

• They come to expect transparency and accountability generally, and help re-create this in civil society and political arenas.

ConclusionsCooperatives are an

important ced tool because of their economic and social benefits:

• Re-circulate local resources• Support education and

training• Create jobs and meaningful

work• Address market failure and

marginality

Co-op Benefits cont’d

• Are economically and environmentally sustainable

• Facilitate joint ownership• Build wealth• Require democratic

participation• Develop leadership capacity and• Promote civic participation.

IN SUMThey are a mechanism to provide most

of the elements we look for in economic development:

Efficient resource allocationProfit or surplusHuman capital developmentSocial capital leveragingIndividual and community

prosperity.