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Can co-operatives beat capitalism? Part 1

Wayne Ellwood says that democratic co-ops offer a very fair solution to our problems.


Co-ops: workers make the decisions. Stringer/Reuters

Most people in the media and free market think Argentina just doesn’t understand. Last May the international business newspapers criticised Argentina for nationalizing the Spanish oil company, YPF. No one really mentioned that Argentina’s oil and gas industry was only ‘privatized’ in the late-1990s under pressure from the International Monetary Fund (IMF) and others. Like many countries around the world, Argentina’s oil industry was owned by the state.

In 2001, the critics were back. After years of difficulties, the resource-rich South American country had a lot of debt, very high inflation, terrible unemployment and negative economic growth. (Like Greece and Spain now?) The IMF’s solution was ‘flexible’ labour conditions, deregulation, less capital control, privatization of state-owned assets, devaluation of the national currency – which only made things worse.

With terrible inflation and tens of thousands of workers on the streets, the government finally decided to stop it all. It decided not to pay its debt and devalued its currency. It was no surprise that the big global financial institutions were angry. They warned that Argentina would become poor and disorganised. This didn’t happen. Over the next ten years the country’s GDP (Gross Domestic Product)grew by nearly 90 per cent, the fastest in Latin America. Poverty fell and employment rose while the government slowly increased spending on social services.

There were many reasons for this surprising change: one was the determination of Argentinians to be independent economically and not rely on foreign capital.

But a big part of its success comes from Argentina’s history of co-operatives. Jewish and Italian immigrants brought the idea of co-operatives with them in the early 20th century. Co-operatives, or co-ops, were well established, especially in agriculture, before the financial and political crisis in 2001. The International Co-operative Association (ICA) says nearly a quarter of Argentina’s 40 million people are in co-operatives and mutual societies.

So when the national economy collapsed and the country’s business class started to take their money away from the factories, the workers had a better idea. They decided to form worker co-ops and manage the factories themselves. The movement became known as las empresas recuperadas (recovered companies).

It wasn’t easy. As many as 400 factories around Buenos Aires were abandoned by their owners. Argentina was a country with many years of corruption and other political problems. The idea of workers taking control and running their own factories as co-operatives was difficult to accept. How to change a system of traditional management? Even the psychological change was almost too difficult. But surprisingly, in spite of problems with bosses, owners and bureaucrats, the idea started to develop.

Today, there are more than 200 ‘recovered’ co-operative factories in Argentina – from 161 companies in 2004 – which employ more than 9,000 people. Most are quite small, which makes them easier to manage. Around 75% employ less than 50 workers; 2% have more than 200 employees. They are in many different industries: shoes, textiles, meatpacking and transport firms.


Skilled and in control: a co-op member works at a recovered bread factory in Buenos Aires. Andres Lofiego/ Majority World

It began as a brave experiment after the economic collapse of 2001 but it has become a lively, stable part of the economy. Andrés Ruggeri (University of Buenos Aires researcher) said: ‘The workers learned that running a company by themselves is a real alternative. That was impossible to imagine before… These are workers who have made their own success.’

As in Argentina’s 2001 crisis, the co-operative spirit often appears in very difficult times, with economic collapse and social disintegration, when people are looking for alternatives. We learn from history.

The first co-operative was of weavers in 1769 in Fenwick, Scotland. But the modern co-op movement really began with the “Rochdale Society of Equitable Pioneers” in December 1844. As the Industrial Revolution developed in Britain, a stronger form of capitalism was totally re-creating the country. Thousands of workers lost their jobs because of steam power; the cities became full of unemployed people; poverty and illness increased because of pollution; men, women and small children worked 70 hours a week in dangerous conditions in the factories.

New thinkers all around Europe disagreed with this destructive industrial capitalism. Proudhon, Fourier, Owen, Marx and Engels all argued for a new social and political order: people before profit and co-operation as more important than competition.

In Rochdale, a busy mill town north of Manchester, 30 citizens (including 10 weavers) put their money together and opened a tiny shop selling candles, butter, sugar and flour. By joining together, they were able to buy things they could not normally buy. Soon they were also selling tea and tobacco. It was a success and an inspiration. It led to a new movement. In the next 50 years, co-operatives and credit unions spread through Europe and around the world.

According to the ICA, more than a billion people are now involved in co-operatives – as members, customers, employees or worker/owners. Co-operatives - in every industry - also provide over 100 million jobs, 20 per cent more than multinationals. Members often have cheaper prices, friendly service or better access to markets but, most importantly, the members are in charge.

‘One member, one vote’. It’s this control that builds social capital and makes co-operatives so important for community identity. Profits can be reinvested, shared among members or put into the local community. Co-operatives are to help their members, not to make private shareholders richer, so they are much more democratic. They empower people. They build community. They make local economies stronger.

The amazing success of the co-op movement is enough for 2012 to be the UN’s International Year of Co-operatives. But the timing is good for other reasons. We’re living in an economic system that produces huge wealth for few people but the majority suffer. This model is broken and it is damaging more people, communities and the natural world. After the financial crisis of 2008 and with the instability of the global economy there is a great need – and desire– for balance and equality. The search for alternatives has never been more urgent.

As this article has been simplified, the words, text structure and quotes may have been changed. For the original, please see: