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Give co-operatives a go

By Harry Throssell - posted Thursday, 7 May 2009


A vivid portrayal of economic division in a nutshell was seen in the Gulf of Aden when three marksmen with state of the art weapons from arguably the world’s richest country, United States, shot dead three men from Somalia, arguably the world’s poorest.

Enthusiastic capitalism has not prevented the world economy going into a tailspin. It has made some people wealthy beyond the dreams of avarice but has never prevented world-wide pockets of extreme poverty. A report on SBS Television’s Cutting Edge program on April 28, 2009, “The Growing Anger of Hunger”, finished with the line “By the end of 2008 the number of undernourished people on the planet had risen to 963 million”.

In the United Nations Human Development Index USA is in the High Human Development bracket with average annual wealth per person of US$44,000 and life expectancy of 78 years. Somalia is not listed at all, having been without an effective government since 1991, but a recent estimate shows average annual wealth of US$600 per person. Ethiopia, also in the Horn of Africa, has per head income of US$700 and life expectancy of 52 years, close neighbour Eritrea average wealth of US$519 and life expectancy of 57 years. Both are listed in the UN’s poorest category, Low Human Development, where all 22 countries except Timor Leste are in Africa.

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One commodity of which there is no shortage in both Somalia and USA is guns, a huge economic asset for the countries manufacturing them, notably USA, Russia, United Kingdom, Germany and China.

Milton Friedman

At the beginning of the current world economic crisis, when the mind-blowing excesses of corporate executives came to light, an American company man told a television camera “government should keep out of running the economy and leave it to private business”. Pure Friedmanism, Milton Friedman being the Chicago University School of Economics guru who died two years ago.

In her award-winning book The Shock Doctrine Naomi Klein spells out the human disasters around the world emanating from Friedman’s extreme capitalism, in which the trick is to take advantage of times when government control is reduced and can be manipulated to allow private companies to monopolise economic resources. One element in this, Klein argues, is “the use of public disorientation following massive collective shocks - wars, terrorist attacks, natural disasters - to push through unpopular economic measures”. At the most chaotic juncture in Iraq’s civil war, for example, “a new law is unveiled that would allow Shell and BP to claim the country’s vast oil reserves … [and] the Bush Administration quietly out-sources the running of the War on Terror to [private companies] Halliburton and Blackwater”.

After a powerful tsunami devastates the coasts of South-East Asia “the pristine beaches are auctioned off to tourist resorts. New Orleans residents, still scattered by Hurricane Katrina, discover that their public housing, hospitals and schools will never be reopened”.

Klein also spells out how hopes for poverty-stricken South Africa engendered by the African National Congress election victory of 1994 fell by the wayside when party president Thabo Mbeki adopted Chicago School philosophy and concentrated on business profits but ignored the needs of the general population. Mbeki has now been voted out.

Former British Prime Minister Margaret Thatcher shared admiration for Friedman’s extreme laissez faire advocacy as did her close friend Chilean dictator Augusto Pinochet, widely believed responsible for the “disappearance” of political foes.

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Many supporters of the free market system claim to believe in competition but actually prefer monopoly. If a man wants to open a new shoe shop and has the choice of moving into a town already with four shoe shops or a town with none, he would be unusual if he chose the first. He would want to avoid competition. In Australia, Wesfarmers is a conglomerate of many retail and wholesale businesses - Coles, Target, Kmart, Bunnings, Officeworks, to name a few - which reduces competition in the marketplace.

It’s time to give co-operatives a go.

In the recent shock at the failures of the free market the surprise is the lack of attention paid to the alternative business model, the co-operative. In this system the conventional upstairs-downstairs system of masters and servants is changed to a “horizontal” system in which owners, managers and workers all take responsibility for the eventual outcome.

When an engineering factory in Argentina was reopened by employees after the owner had closed it down and caused massive unemployment, the workers decided to run the organisation with a committee structure and whatever their skills and responsibilities all worked for the same pay. In another reopened workplace, also in Argentina, the staff as a committee agreed on a differential wage structure according to each person’s work responsibilities.

One of the longest established co-operatives is Mondragon Cooperative Corporation [MCC] in northern Spain, a favourite interest of former Australian Federal and Victorian Member of Parliament Race Mathews.

A priest, Don Jose Maria Arizmendiarreta, had been running an industrial apprentices school in a region of very high unemployment when in 1954 he asked five students to raise money to buy a business. They raised enough to take over a small company and brought it to Mondragon, where in a disused factory, using hand tools and sheet metal, they made oil-fired heaters and cookers. In 1956 the company had 24 owner-employees, increasing to 149 in 1958, and 21,000 in 1990.

MCC is now the 7th largest business group in Spain, the third largest employee and a major competitor in European and global marketplaces. It has become a conglomerate of some 160 manufacturing, retail, financial, agricultural and support co-operatives with annual sales exceeding US$6 billion. When the level of unemployment in the Basque region in recent years was around 25 per cent, employment in the co-operatives increased to 78,000, MCC providing jobs for roughly 6 per cent of the region.

The MCC is Spain's largest exporter of machine tools, largest manufacturer of domestic appliances, and the third largest supplier of automotive components in Europe. Subsidiaries manufacture semiconductors in Thailand, white goods components in Mexico, refrigerators in Morocco, luxury motor coach bodies in China. MCC construction co-operatives have built key facilities for events such as the Barcelona Olympic Games and the Guggenheim Museum in Bilbao. It has Spain's largest retail chain with 37 hypermarkets, 211 supermarkets, 419 self-service and franchise stores and 333 travel agency branches.

The manufacturing co-operatives are serviced by a system of secondary support co-operatives, also owned and governed jointly by their workers, whose aim is to make the MCC self-sufficient in key requirements of capital, education and training, and research and development.

Principles

The MCC is based on several fundamental principles. Every worker in the company has a vote on the election of the boards of directors which hire managers. If they don't like what management is doing they can vote out the board at the workers' congress.

All members put money into the MCC's own bank, itself a co-op, which serves the interests of individuals while its mission is to fund new jobs and enterprises. This money accumulates interest and can be taken out on retirement.

There is a two-way process between education and industrial experience. The original school for apprentices now bestows degrees and is closely integrated with the industries.

In contrast to most large firms where the salaries of chief executive officers outstrip those of other workers by a long chalk - 344 to 1 in one US company in 2009, according to The Star Ledger, New Jersey, 1 September 2008 - in MCC those in top management earn only 15 times the wage of the person at the bottom of the pay-scale. If the boss wants a rise, all get a rise. All members have an equal share, proportionate to salary, in profits or, on occasion, losses. Programs are in place to ensure no one loses his job, but if that is inevitable he or she is recompensed and paid educational benefits for retraining. At a period in the1980s when the Basque region lost 150,000 jobs, MCC created an additional 4,200.

British co-ops

The seeds of the co-operative movement date back to the early 19th century in Scotland when successful industrialist Robert Owen found productivity in his factories increased when he provided good working conditions. The British co-operative movement was launched in 1844 when 28 cotton weavers founded the Rochdale Equitable Pioneers, responding to a pressing need for affordable food, light, fuel and clothing. The Co-operative Wholesale Society was founded in 1863 and to this day is Britain's largest co-operative body, with more than 500 food stores, supermarkets and hypermarkets employing 35,000 workers, extensive funeral and farming interests, the country's second largest mutual assurance society with 35 million members, and a rapidly growing bank with two million customer accounts.

The British Liberal Party's policy platform after the 1939-1945 world war advocated worker-owned business enterprises and a number of coal mines and shipyards in the UK have operated on this principle.

Australia has its own co-operative history with Rochdale consumer co-operatives founded in New South Wales in 1859 and operating thriving local stores throughout much of Australia up to the decades following World War II, although meeting its demise in 1986.

Robert Theobald described a community garden in a distressed neighbourhood of New Orleans giving people an opportunity to produce vegetables and fruits which were not easily available in that city and therefore costly. In Peru, when the government nationalised tin mines then pulled out, leaving whole communities with no alternative work, ten thousand miners created four co-operatives to keep them going.

In USA at present many houses are standing empty because the owners could not sustain mortgage payments. At the same time many people are homeless because they cannot afford to buy or pay rent. This is a bizarre use of a resource as basic as shelter. However, nature is taking the obvious course, with homeless families moving in to empty houses anyway. To do otherwise would compound nonsense. And some authorities are turning a blind eye.

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About the Author

Harry Throssell originally trained in social work in UK, taught at the University of Queensland for a decade in the 1960s and 70s, and since then has worked as a journalist. His blog Journospeak, can be found here.

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