Cooperative (or co-operative) economics is a field of economics that incorporates cooperative studies and political economy toward the study and management of cooperatives.
History
Cooperative economics developed as both a theory and a concrete alternative to industrial capitalism in the late 1700s and early 1800s. As such, it was a form of stateless socialism. The term socialism, in fact, was coined in The Cooperative Magazine in 1827. Such socialisms arose in response to the negative effects of industrialism, where various clergymen, workers, and industrialists in England, such as Robert Owen, experimented with various models of collective farming and community housing with varying degrees of success. This movement was often integrated with other progressive movements of the era such as women's suffrage and abolitionism. "British industrialist Robert Owen (1771–1858) founded a model factory town around his cotton mill and later established a model socialist community, New Harmony, in Indiana. Some proponents of women's rights, such as Emma Martin (1812–1851) in Britain and Flora Tristan (1801–1844) in France, stirred controversy by promoting socialism as the solution to female oppression."While state socialism was growing popular, rising in the early 1900s, followed by collapse in the 20th century, the cooperative movement grew exponentially in all countries affected by socialism and British colonialism, such as Canada, the U.S., South Africa, and across Europe. Jessica Gordon Nembhard has produced one of the most thorough academic monographs on cooperative economics entitled Collective Courage: A History of African American Cooperative Economic Thought and Practice, which looks at how African American communities organized to survive white nationalism, capitalism, and colonialism in the 20th century. The International Cooperative Alliance (ICA) was formed in 1895 and National Cooperative Business Association founded in 1916.
The post-WWII era experienced a decline in interest towards cooperatives in the economics profession, with much lower quality and quantity of the discussion on cooperatives in economics text books published after the war compared to those published before the war.
The University of Wisconsin Center for Cooperatives was founded in 1962, which was possibly the first organization to collect data on cooperatives. In 2000, the Democracy Collaborative was created out of the University of Maryland, which – among other things – facilitates the creation and development of cooperatives. In 2004 the United States Federation of Worker Cooperatives (USFWC) was founded, which, like the ICA, facilitates worker cooperatives (see "Types and Structures of Cooperatives" below). The ongoing success of cooperative economics in providing more effective alternatives to capitalist firms was so significant by the 21st century that the United Nations Assembly "...declared 2012 as the International Year of Cooperatives, highlighting the contribution of cooperatives to socio-economic development, in particular recognizing their impact on poverty reduction, employment generation and social integration."
Contemporary cooperative economics has gained even further popularity since 2012, with numerous TED talks dedicated to the subject; they demonstrate how cooperative economics is able to solve problems in housing, food, and poverty that modern industrial countries have so far been unable to solve. In 2013, the USFWC spawned the Democracy at Work Institute, a sister organization that also facilitates the growth, creation, and conversion of worker cooperatives.
In February of 2024, the United Nations General Assembly declared 2025 the "UN International Year of Cooperatives."
Types and structures of cooperatives General structures There are generally four major types of cooperative organizations: Consumer cooperatives, in which the consumers of a co-operative's goods and services are defined as its members (including retail food co-operatives and grocery stores, credit unions, etc.) (Example: REI, federal credit unions, etc.) Worker cooperatives, which are co-owned and democratically co-managed by workers/contributors. (Example: Home-Care Associates, The Driver's Cooperative, Means TV, etc.) Producer Cooperative (or "Contributor" Cooperative), which are co-owned by major producers/contributors instead of every worker. (Example: Stewart Healthcare, Land O’ Lakes, OceanSpray, Zen-Ho) Purchasing Cooperative (or "Supply" or "Distribution" Cooperative), which are co-owned by member organizations, which consolidate into a group in order to aggregate demand (i.e., buy in bulk)—which reduces purchase costs. This may include everything from school supplies to medical supplies. (Example: Ace Hardware, True Value, NAPA Autoparts).
The equity structures of cooperatives are therefore various and unlimited. Some implement private/investor equity while others do not. Since the broad purpose of cooperatives is to offer different power structures than ordinary capitalist institutions (which are owned by profit-seekers that may or may not work at the firm), as well as to improve the economic and social life of workers and all who are involved beyond mere profit and creating products/services, there is much internal debate about what is truly cooperative, democratic, etc. For example, if a firm is 60% owned by private investors and 40% owned by workers, this would generally not be considered a worker cooperative. ESOPs are also not considered cooperatives even if workers own 100% of the firm, because of the usual lack of democratic governance.
Legal structures Cooperatives may take on different legal structures depending on jurisdiction, such as an LLC, ESOP, 503c non-profit, or a distinctive cooperative legal structure (if the state provides for one, such as Massachusetts). ESOPs (Equity Stock Ownership Plans, where workers own shares for retirement) that implement democratic governance are colloquially referred to as "ESOPeratives."
In 1996, New Zealand passed the Cooperative Companies Act. In 2003 the Statute for a European Cooperative Society created a specific legal structure for cooperatives in the EU.
Facts and figures on cooperatives There are about 3 million cooperatives on the planet. 12% of global humanity is a member of a cooperative. 1 in 3 Americans are coop members. 1.5 million Americans live in a housing cooperative. Cooperatives electrically power 56% of the United States' landmass and 42 million people. Coops possess over $1 trillion in assets worldwide and over $640 billion in annual sales. 92 million Americans turn to 7,500 credit unions (client-owned cooperatives) for financial services; 50,000 American families rely on cooperative day-care facilities. The Navy Federal Credit Union (founded 1933) is the world's largest credit union with 10.8 million members, 345 branches, and $147.9 billion in assets, serving the men and women of the Armed Forces, Department of Defense, veterans and their families. The largest worker-cooperative is Mondragon Corporation in Spain, which has over 80,000 associates (workers). The largest cooperative sector by membership is mutual insurance, with over a quarter million members. The following statistics come from: International Labor Organization, "Statistics on Cooperatives." Available at https://www.ilo.org/ ; NCEO (2020). Available at https://www.nceo.org ; International Cooperative Alliance, "Facts and Statistics," https://www.ica.coop/en/cooperatives/facts-and-figures ; NCBA, https://ncbaclusa.coop/resources ; NRECA https://www.electric.coop/electric-cooperative-fact-sheet
The most comprehensive data collection on the largest cooperatives comes from the World Cooperative Monitor.(see the 2021 report here )
Distinctives Cooperatives are different from conventional firms in that the purpose of the firm is not to profit shareholders, but to benefit its members (whether workers, consumers, suppliers or purchasers). Because parts of the cooperative movement were anti-capitalist but not as revolutionary as Marx (who aimed to abolish all private property), Marx and Marxists were hesitant about supporting the cooperative movement (especially consumer cooperatives) in the 19th century. The value of consumer vs. worker cooperatives continues to be debated by theorists, activists, and scholars (see below).
The International Cooperative Alliance provides seven principles of cooperatives, each that contrasts with capitalist firms:
"Voluntary and Open Membership" (in contrast to coerced/involuntary participation) "Democratic Member Control" (in contrast to nondemocratic control) "Member Economic Participation" (in contrast to purely transactional relationships and closed-book management) "Autonomy and Independence" (in contrast to state-owned or corporate-ownership) "Education, Training, and Information" (in contrast to "mushroom management" where workers are "kept in the dark," and information is intentionally funneled through power channels) "Cooperation among Cooperatives" (in contrast to competition amongst firms) "Concern for Community" (in contrast to purely product or profit-oriented concerns)
An earlier summary of cooperative principles is called the Rochdale Principles.
Governments may define cooperative enterprises with a simplified version of the above principles. For example, the Australian government defines a cooperative enterprise as follows:"They serve their members by providing goods and services that may be unavailable or too costly to access as individuals. They share costs and carry on their enterprise under principles of: non-discrimination democracy independence education and care for communities."Cooperative economics is also distinct enough from capitalist economics in the public square that it has established and maintains its own domain (.coop).
Cooperatives and Sustainability Jeffrey Sachs, an economist who works with the United Nations, has emphasized the centrality of cooperative models of economics for the future survival of our species; though he pays little attention to actual cooperative enterprises and their development as more sustainable and humane models of production, he nevertheless contends more broadly that humans must "forge a new era of cooperation on a global scale" in order to survive.
Elinor Ostrom, the first woman to receive the Nobel Prize in economics, demonstrated the ability of cooperative enterprises and organizations to effectively manage environmental goods more than strictly political or market means.
Forestry and electricity cooperatives are some of the largest in the world, which puts them in a unique position to address the negative effects of climate change. E. G. Nadeau provides some examples of what this means in his popular introduction to cooperative economics, The Cooperative Solution: "Dairyland Power Cooperative, based in Wisconsin, has been a national leader in promoting the use of methane gas derived from cow manure as an energy resource. Kauai Island Utility Cooperative, the youngest generation and transmission cooperative in the United States, "is aggressively pursuing diversification of its energy portfolio to include a growing percentage of hydropower, photovoltaic, bio-fuel, and biomass"