This post is the first in a series of articles by Jeffrey Hollender on cooperative businesses models, specifically from Mondragón, Spain
That Italian and Basque cooperatives have grown so large is somewhat a mystery since, unlike capitalist enterprises, cooperatives are not expansionist by nature… Capitalist enterprises tend towards growth because increased scale generally leads to greater returns for a concentrated ownership. To simplify, if a capitalist bakery owner has a bakery with ten workers each earning $20,000/year but generating $30,000/year of wealth, the owner reaps $100,000 per year ($10,000 “profit” multiplied by ten workers).
Contrast this with the economics of a typical worker cooperative. In a worker cooperative, those profits not reinvested are divided among the workers who generated the wealth. Assuming no reinvestment, in addition to her $20,000 salary, each baker would receive a $10,000 profit distribution at the end of the year.
Under a sunny blue sky cooled by an incessant breeze, Bologna, Italy, is everything one would expect from a moderately-sized Italian city: Endlessly wonderful food, sparsely spoken English, gelato to die for and a people in constant motion, except when at rest.
We came in search of an understanding of how the cooperative movement in Italy differs from that of the movement in the US, the UK and our next destination, Spain. The success of worker cooperative models in Italy and Spain present a compelling model for building a new sustainable economy.
Cooperatives in the Emilia Romagna region of Italy, at which Bologna is the center, are so pervasive they are virtually invisible. Other than the “Coop” grocery stores to be found every few blocks, the cooperative business structure is so deeply woven into the business culture as to go unnoticed by most inhabitants. It’s not branded, advertised, or promoted. In fact, no one could point us toward the 20-story-high office building housing the regional offices of Legacoop, Italy’s biggest cooperative, despite the fact that it’s situated in one of the tallest buildings in the city.
Before I take you behind-the-scenes at Legacoop and share their innovative model, let me first share some history: Back in 1854, Italy’s first consumer cooperative, the “Magazzino di Previdenza,” was founded in Turin. In 1886, 100 delegates representing 248 cooperatives with 70,000 members formed the National Cooperative Federation. In 1893, that became the Cooperative League, now known as Legacoop. Today, the Italian cooperative movement includes three primary organizations, Legacoop, AGCI and Confcooperative. Collectively, they represent 43,000 cooperative businesses generating an astounding revenue of 127 billion Euros, or 7% of the Italian GDP, and their 1.1 million employees represent 6% of the total population.
And they are flourishing.
In comparison to other countries their growth may be attributed to political and economic support, writes Tim Huet, director of the Center for Democratic Solutions, a nonprofit in San Francisco that advises coops.
“The Italian constitution recognizes the social contribution of cooperatives and directs that legislation should promote and favor cooperatives. Italian tax legislation treats worker cooperatives as non-profit entities requiring surplus to be invested for further job creation; i.e., in exchange for favorable tax status, worker cooperatives are restricted from distributing profits among current members in favor of reinvesting towards new democratic employment. Another interesting aspect of Italian tax law is that it requires 3% of each cooperative’s surplus to go into a fund to develop new cooperatives.”
Further, Italian coops have engaged in a unique 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 Huet pinpoints, “leverage niche markets created by the volatility of the global market.” He continues: “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.”
Of the 43,000 cooperative businesses in Italy, 14,500 belong to Legacoop employing 485,000 people. Legacoop represents businesses in every industry from banking and insurance to retailing, construction, agriculture, travel and manufacturing. Its role is to advocate, represent, protect cooperative values, build the movement by developing new businesses, and advocate for laws that provide preference to cooperatives, nationally and internationally.
Specifically Legacoop’s mission is to:
- Promote cooperative identity values and culture.
- Promote a sound environment for the development of cooperatives.
- Promote the spreading of cooperatives throughout the national territory.
- Build an inclusive society based on equity and solidarity.
- Promote international and European relations.
(The seven cooperative principles developed by the Rochdale Society of Equitable Pioneers in England on October 23, 1844, which govern all aspects of Legacoop.)
While the size and influence of the cooperative movement in Italy dwarfs the scope of the sector in the US, several aspects of Legacoop are of interest relative to the role they play in supporting the infrastructure of the movement:
- “Bellacoopia,” a strategic project exclusively focused on promoting the cooperative culture among the students in the Emilia Romagna region, helps students create “virtual cooperative companies,” complete with detailed business plans. Students enter their ideas into a competition that selects the most promising new ideas based solely on the originality and economic sustainability of the idea. No attention seems to be given to environmental sustainability.
- A second program, “Generazioni,” the young cooperators network, focuses on vocational training, retraining of workers into new industries, and a focus on how to leverage values into business growth strategies.
- “Rete Regional Dei Servizi” is focused on supporting small- and medium-sized cooperatives and the unique challenges they face competing with larger businesses in a global economy. Rete Regional Dei Servizi has developed a network of local facilitators who work to ensure businesses are knowledgeable about changing laws, are working collaboratively and leveraging the latest technology.
- Lastly, “Innovacoop,” focuses on innovation and the international growth of the cooperative movement. Innovacoop provides consulting services, training and works on the development of partnerships within the EU.
These are models to be inspired by as we seek to create a stronger movement in the US.
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.
* Tim Huet’s complete article can be found in GEO #30