Tag: Cooperatives

How the Basque Country provides intriguing solutions to some of the world’s thorniest challenges

 

The Democratic Party’s Presidential hopeful Bernie Sanders took inspiration from Denmark when he proposed a 60 percent income tax increase in exchange for public services. However, American voters apparently did not welcome a candidate who wanted to increase taxes. Had Mr. Sanders taken inspiration from the Basque Autonomous Government instead of northern Europe, he may have had a better chance of gaining support from American voters.

The Basque Country, with a total population of 2.2 million, is the richest and most advanced economic region in Spain. According to an article by Sami Mahroum in the National, “it is among Europe’s top 20 percent of regions in wealth.”It also has the highest percentage of employment for medium to high-tech manufacturers in Europe. Many regard the Basque Country as a robust competitor to the advanced manufacturing regions in Germany. However, the greatest achievement of the Basque Country is how it has overcome local terrorism, globalization, and leadership challenges rather smoothly compared to both the Spanish state and the European Union.

Mr. Sanders could have also learned from the Basque Cooperative economic model. 60 years ago, Jose Maria Arizmendiarrieta formed the Mondragon federation of cooperatives. Today, Mondragon is Spain’s largest cooperative group, providing employment for more than 75,000 people and contributing 12 percent of the region’s GDP. Mondragon owns subsidiaries in 125 countries around the world. The Mondragon cooperative model is unique, as it has a cap on the CEO’s salary, limiting it to six times the lowest salary offered at the cooperative. Employees put aside 6.5 percent of their earnings toward a foresighted fund as a part of their pensions and contingencies.

The Basque Country’s unique cooperative model provides an inspiration in innovation for the world’s poverty and inequality issues. This model echoes the sentiments of American voters well, who are dissatisfied with globalization, rambling capitalism, big government, and high taxes. The Mondragon model serves as a mutual-capitalism or democratic capitalism model rather than the “invisible hand.”

For further reading: https://www.thenational.ae/opinion/how-the-basque-country-provides-intriguing-solutions-to-some-of-the-world-s-thorniest-challenges-1.623572

The Basque Economy: Present Reality and Future Prospects

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The Euro symbol. By Svilen.milev, at Wikimedia Commons

Two interesting articles on the Basque economy have recently been published by BasqueTribune:

In “How is the Basque Economy Doing?” economist Joseba Barandiaran offers a general overview of the present situation, describing a predominantly service-based economy but with an important manufacturing sector. While noting the healthy state of this “relatively rich economy,” Barandiaran also points out certain major challenges that need to be addressed: improving the technological dimension of Basque manufacturing, increasing RDI investment, and, perhaps most difficult of all, addressing the continuing demographic decline in the Basque Country. Read the full article here.

In “The Basque Country: We Lived in the Future (We Just Were Not Aware of It)” economist Asier Alea criticizes the assumption that advanced economies are merely service-based, arguing for a critical reflection on the place of manufacturing in contemporary societies. In his view, the recent crisis has demonstrated that those economies that maintained a robust manufacturing sector were better able to cope with the ensuing problems. We are, he argues, now on the verge of a new industrial revolution that will also herald new social and cultural changes involving a global vision rooted in strong local identities; changes that, he contends, the Basque Country is well placed to capitalize on, having embraced this vision already. Read the full article here.

If you’re interested in these topics, check out some of the Center publications on the Basque economy and related issues such as globalization and innovation.

Basque Economy: From Industrialization to Globalization, by Mikel Uranga, available free to download here. A general survey of the historical evolution of the modern Basque economy from its roots in heavy industry to the more diverse contemporary situation.

Implications of Current Research on Social innovation in the Basque Country, edited by Ander Gurrutxaga Abad and Antonio Rivera. An examination of social innovation in the Basque Country, focusing on knowledge transfer, learning, and innovation.

Innovation: Economic, Social, and Cultural Aspects, edited by Mikel Gómez Uranga and Juan Carlos Miguel de Bustos.  A study of the different ways in which innovation is understood in the Basque Country.

Basque Cooperativism, edited by Baleren Bakaikoa and Eneka Albizu. A comprehensive exploration of why the cooperative movement has flourished in the Basque Country and its response to the challenge of globalization.

Behavior and Organizational Change, edited by Sabino Ayestarán and Jon Barrutia Goenaga. Leadership, management, and cooperation in the workplace are all examined here from the perspective of the Basque Country.

See also a couple of more recent publications that examine the general issues raised in the abovementioned books in more detail:

Innovation and Values: A European Perspective, by Javier Echeverria. Charts the historical development of innovation policies and offers a new line of research that takes into account the history and philosophy of science and technology, but which underscores the profound specificities of the concept of innovation.

Building the Basque City. The Political Economy of Nation-Building, by Nagore Calvo Mendizabal. A critical examination of different perspectives on nation and state formation in Spain and the Basque Country within a European context, taking economic issues such as the controversial High Speed Train project and European integration as its focus.

 

 

 

Cooperatives Roles in Local Economic Development (LED)

local-entrepreneurship

The concept of economic development originated in the early twentieth century when Western countries began to modernize and industrialize their economies. Since then, the evolution of the developmental concept has been influenced by the emergence of capitalism and demise of feudalism (Contreras, 1999). However, development as it is understood in the Social Sciences today emerged during the period of reconstruction initiated in the Unite State in 1949, when President Harry Truman declared, at his inaugural address, that economic development was a priority for the West (Truman Library, 2015). The developmental theories that emerged during the 1940s and 1950s, known as classical developmental theories, emphasize the central role that the state must play in major phases of economic development.  Nevertheless, a newer emerging contemporary developmental theory, known as local economic development, suggests the participation of indigenous populations during developmental planning.

A report by the International Labor Organization (ILO) (2006) specifies the role of a local economic development strategy in bringing prosperity to a local civil society. The ILO report specifically notes how local economic development has become a significant deterrent to globalization challenges in many part of the world. Further, the ILO stipulates that cooperative movements have become the foundation for capital accumulation, socioeconomic development, and the democratization of political and social life in many parts of the world. History has recorded how cooperative movements became the source of mobilization for local economy activities in South Africa (Khumalo, 2014), in Nigeria (Mande, at al., 2014), and in the United States (Bartik, 2003). Some of the notable achievements of cooperatives in developing countries include enhancing the employability of more vulnerable parts of the population, establishing a balance between community-centered versus self-interest policies, and  improving community-business relations (Fulton & Keltinson, 1992). Indeed, the collective nature of cooperatives can be beneficial in the local economic development approach.

 

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For Further readings in cooperatives and local economic development topic please refer to the following literature:

Bartik, T. J. (2003). “Local economic development policies”, Upjohn Institute Working Paper No. 03-91. Kalamazoo, MI: W.E. Upjohn Institute for Employment Research.

Contreras, R. (1999). How the concept of development got started. Transnat’l L. & Contemp, 47.

Fulton, M. E., & Ketilson, L. H. (1992). The role of cooperatives in communities: examples from Saskatchewan. Journal of Agricultural Cooperation, 7, 15-42.

International Labour Organisation (ILO). (2006). A local economic development manual for China. Geneva: International Labor Organization.

Mande, S., & Lawal, K. A. (2014). Cooperative marketing societies and its challenges for sustainable economic development in Lagos, Nigeria. Journal of Research & Method in Education, 4(6), 24-31.

Truman Library. (2015, April). Harry S. Truman Library and Museum. Retrieved from http://www.trumanlibrary.org/

Mondragon Model: Independent and Community Based Development

Co-Op-Principles

The cooperative business model has been implemented across the globe to improve the living of lower income populations in many parts of the world. Birchall (2004) notes the cooperative movement contribution in reaching the United Nations Millennium Development Goals (MDG) in poverty eradication. In South Africa, cooperatives have become an alternative source of income in the face of growing unemployment and under employment among the low-income population (Khumalo, 2014). Nevertheless, not all cooperatives in the world perform well. Prior study on the cooperative movement shows that self-determination, grassroots participation, and nongovernmental intervention are the basis of a successful cooperative (OCDC, 2007). On the other hand, the government mobilization model tends to obstruct the competitiveness of cooperatives, as evidence shows how cooperatives in the less developed countries have a low survival rate due to governmental intervention, which has created a group of opportunists among members of the cooperatives who take advantages of governmental subsidies and assistance (Nyambe, 2010; Dyi, 2011). One cooperative that seems to be successfully withering the internal issues related to self-determination and internal conflict is the Mondragon Cooperative in the Basque Country, Spain.

The Mondragon Cooperative represents the prime example of how cooperative entrepreneurship based on community participation and democratic structure eradicates poverty and creates sustainable living for the members. The social entrepreneurship of Mondragon is rooted in the cohesiveness and collective tradition of Basque culture. As a result, Basque traditions have cemented the members and community dedication and efforts to establish an autonomous cooperative movement. In contrast to outdated stories of failed cooperatives, the Mondragon Cooperative has grown extraordinarily since its infancy, and it still progresses in terms of real-growth of revenues and workforce (MCC, 2015). During the early years of this cooperative’s development, the Mondragon founders successfully mobilized the local community to establish their grassroots efforts to fight against their economic constraints by establishing cooperatives. The founders focused on maintaining their independence and kept the cooperatives out of the governmental influence. Admiring the success of Mondragon model, Clamp and Alhamis (2010) stipulate that the independence  of Mondragon contributes to its maturity and growth into a complex of cooperative networks, a concept that should be replicated elsewhere, and the spirit for self-determination and community efforts should be the basis for building a successful cooperative in developing countries. One example of such implementation is how the Mondragon cooperative has served as a model inspiration for CODC (Cooperative Ownership Development Corporation) in New Mexico, which aims at developing businesses that serve the local economy (Clamp & Alhamis).

If managed well, cooperatives can be a critical instrument in the poverty eradication effort across the globe. Prior study in the developing world shows how cooperatives have stimulated economic activities in smaller communities in which large enterprises cannot operate due to small profit margins. However, in order to function properly as a grassroots based institution, cooperatives must remain independent and free from political intervention. Instead, the government should facilitate policies that enable cooperatives to function as autonomous entities, and to provide managerial and administrative training.

 

References for Further Readings

Birchall, J. (2004). Cooperatives and the millennium development goals. Geneva: International Labour Office.

Clamp, C. A., & Alhamis, I. (2010). Social entrepreneurship in the Mondragon Cooperative Corporation and the challenges of successful replication. Journal of Entrepreneurship, 19(149), 149-177.

Dyi, L. (2011). Status of co-operatives in South Africa. East London, South Africa: The South African Department of Trade and Industry.

Khumalo, P. (2014). Improving the contribution of cooperatives as vehicles for local economic development in South Africa. African Studies Quarterly, 14(4), 61-79.

Mondragon Cooperative Cooperation (MCC). (2015). History | MONDRAGON Corporation. Retrieved from http://www.mondragon-corporation.com/eng/co-operative-experience/history/

Muthuma, E. (2012). Do co-operative development policies really lead to the development of co-operatives?: Lessons from Kenya. Africa Insight, 41(4), 176-191.

Nyambe, J. (2010). Workers’ cooperatives in South Africa, an assessment and analysiso of conditions of cuccess and failure. In DGRV-South Africa-working paper no. 6. Berlin: Deutscher Genossenschafts und Raiffeisenverband.

Overseas Cooperative Development Council. (2007). Pathways to economic, democratic and social development in the global economy. Washington, DC: US Overseas Cooperative Development Council.

Cooperatives over Corporations

Gold-Mining-Cooperative-Vs-Capitalist-Mining-Company-Works--How-Corporations-Work--

 

Relatively unknown among ordinary people, cooperatives have a substantial presence in America. A 2009 survey by the University of Wisconsin’s Center for Cooperatives found that cooperatives have generated $653 billion in sales and provided jobs for more than 2 million people in the United States. The survey also reveals that there are as many as 30,000 cooperative organizations in America. Cooperative enterprises conduct normal business activities similar to their corporation counterparts, except that cooperatives have a democratic structure, an equitable sharing of income, and vivid commitment to the common good of the surrounding community. Surprisingly, many well-known American businesses are actually cooperatives. The list of widely recognized American cooperatives includes ACE Hardware, Best Western Hotels, Organic Valley, REI, True Value, and WinCo.  All of these companies emphasize their business philosophy on democratic values, humanism, and a community focus. Hence, this fact has challenged the conventional wisdom of many ordinary Americans that the foundation of American economic success lays only in the hands of corporations.

Cooperatives involve large-scale structural reform that ordinary Americans can implement right where they live; giving small groups a pragmatic and effective way to push back against the arrogance and avarice of the centralized, hierarchical corporate model. Not only do co-ops work economically, they also privilege ordinary people, offering real democratic participation and putting some “unity” back in “community.”

For further reading please visit the following websites:

http://www.truth-out.org/opinion/item/6862-cooperatives-over-corporations

http://www.uwcc.wisc.edu/whatisacoop/BusinessStructureComparison/

http://www.forbes.com/2010/05/13/cooperatives-co-op-leadership-citizenship-ethisphere.html

** Horohito Norhatan is a graduate student at the Center who is interested in cooperatives and is sharing with us a series of articles on his favorite research topic, cooperatives, Horohito received his M.L.S. in political leadership and public services from Fort Hays State University. His research focuses on cooperative movement, economic democracy, political economics, and development policy. In his graduate thesis, “Cooperative Impacts on Poverty Eradication in Indonesia,” he investigated the impact that Indonesian cooperative organizations had in reducing the poverty rate, generating community wealth, and increasing the regional gross domestic product. Under the guidance of Dr. Xabier Irujo, Horohito is conducting research related to Basque cooperative organizations and their impact on the development of the Basque economy.

Cooperative Movement and Community Efforts are a part of the American DNA

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One part of American history has been corrupted, concealed, and mythologized. John Curl, the author of a book titled For All the People argues that communalism and the cooperative movement have been systematically buried from U.S. history.  In his book Curl demonstrates how the democratic community based economic model had been a part of U.S. political and economic policy and how it was interwoven with many of the historical transformational events of the country, including cessation from the British Empire, the abolition of slavery, the attainment of women’s suffrage, the workers’ and union rights crusade, and the civil rights movement. Curl also elaborates on how the principle of economic democracy has been in constant opposition to the wealth concentrated capitalism that has created massive disparities in the national distribution of income. Therefore, Curl encourages ordinary citizens to reclaim this lost history by embracing the true character of the American nation that is based on the people, democratic value, and community participation.

For further reading:

http://www.amazon.com/All-People-Cooperation-Cooperative-Communalism/dp/1604865822/ref=sr_1_1?ie=UTF8&qid=1433413249&sr=8-1&keywords=9781604865820

http://www.pmpress.org/content/article.php?story=johncurl

http://www.truth-out.org/opinion/item/14076-cooperatives-and-community-work-are-part-of-american-dna

The European Cooperative Boom

manifesto

 

In the Europe there are more than 140 million people who have become members of cooperatives. European countries have experienced an expansion in the number of worker cooperatives. There are currently more than 83,000 cooperatives businesses in 42 European countries, well over double the number in 1980s. There are some regions in Europe that  have, for the most part, a strong historical background of cooperativism such as the Emilia Romagna region in northern Italy and the Basque Country, with its Mondragon Cooperative. Both the Emilia Romagna and Mondragon cooperatives are networks of cooperatives that produce products and services including sales, finance, machinery, and universities. Favorable local government policies toward the cooperative movement are behind the recent growth of cooperatives in Europe. European cooperatives enjoy tax benefits and supportive legislation that spur their success as the driving force for economic development at the community level. Nevertheless, cooperatives also face several challenges, including just in time production methods, lack of union representation, and loss of solidarity among workers.

For further reading please read the following books and article:

https://basque.unr.edu/docs/CR6.pdf

http://www.amazon.com/The-Myth-Mondragon-Cooperatives-Working-Class/dp/0791430049

http://www.redpepper.org.uk/Europe-s-co-op-boom/

** Horohito Norhatan is a graduate student at the Center who is interested in cooperatives and is sharing with us a series of articles on his favorite research topic, cooperatives, Horohito received his M.L.S. in political leadership and public services from Fort Hays State University. His research focuses on cooperative movement, economic democracy, political economics, and development policy. In his graduate thesis, “Cooperative Impacts on Poverty Eradication in Indonesia,” he investigated the impact that Indonesian cooperative organizations had in reducing the poverty rate, generating community wealth, and increasing the regional gross domestic product. Under the guidance of Dr. Xabier Irujo, Horohito is conducting research related to Basque cooperative organizations and their impact on the development of the Basque economy.

The Cleveland Model: Basque style cooperative organization in America

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(Source: www.garalperovitz.com).

In a traditional hierarchical company, workers have no influence on the day-to-day business routine and have no share in the corporation’s profit pie. As a result, the workers can be apathetic toward the company, as they do not feel like a part of the organization. The everyday working experience is just another clocking in and clocking out, collecting the hour’s wages. On the other hand, in a worker-owned and worker-controlled business firm such as a cooperative, employees have the opportunity to participate in the decision-making process and be a part of the company’s success. The cooperative organization is the depiction of capitalism with a human face, a hybrid economic model between socialism and capitalism. Although operatives have the characteristic of a philanthropic based organization, in structure most cooperatives are a for-profit organization, owned and run by the people who actually work in the organization. In this type of business, each worker, from production worker to top management, gets one vote in the major decision-making process. Both the lower level employees and administration staff earn an equal share of income, disposing of the requirement for any government-set minimum wage. In addition, workers participate in a voting process and group discussion to secure their business interests and ensure a healthy monetary position for the cooperative from which they earn their fortune. Therefore, cooperatives tend to encourage long-haul and stable employment with a better working environment and better income.

The study of the cooperative movement is gaining public attention when it comes to economic inequality issues. One the most cited cases studied in this matter is that of the Mondragón Cooperative Cooperation (MCC) located in the Basque Country of Spain. Mondragón is a prime example of how a cooperative structure can provide goods and services to society while at the same time creating wealth for the community. Mondragón co-ops have turned a formerly depressed area of the Basque Country in Spain into a thriving community, producing, among other things, computer chips, high-tech machinery, and large appliances. As Mondragón and most cooperative organizations tend to reinvest some of their corporate earnings back into the local community, they tend to favor sustainable business models that generate local employment and promote entrepreneurship. While embracing free market principles, Mondragón energizes its employees to strive for proficiency, quality control, and productivity so that their organization competes successfully in the commercial world. Following labor union standards, the Mondragón cooperative also tends to allow its employees to sort out and arrange their working environment, sensible working hours, and reasonable pay. The Mondragón business methodology decentralizes forces within the managerial structure and in this manner reduces the possibility of corruption and corporate espionage. The superiority of Mondragón cooperative models in resolving the antagonism between labor and capital has inspired others to embrace the cooperative as a model for community development in lower income regions.

Mondragón Style Cooperatives in America

One of the pioneers of an alternative business model in America, based on the highly successful Mondragón cooperative, is the Evergreen Cooperative in the Cleveland, Ohio. The Evergreen Cooperative was initiated in 2008 as a result of a joint venture among Cleveland-based organizations Including the Cleveland Foundation, the Cleveland Clinic, University Hospitals, the University of Maryland College Park, Case Western Reserve University, and the City of Cleveland. The Evergreen Cooperative Initiative is attempting to create occupations with livable wages in six neighborhoods with an average income per household below $18,500. This region is also known as the Greater University Circle (GUC).

 For further reading please visit:

http://basquebooks.myshopify.com/products/basque-cooperativism

http://www.thenation.com/article/cleveland-model

http://evergreencooperatives.com/

http://community-wealth.org/content/cleveland-greater-university-circle-initiative