Worker Cooperatives as an Alternative Solution

Worker cooperatives are firms owned and self-managed by worker-members, wherein every worker-member participates in labour, planning, investment, and democratic governance. Despite the cyclical economic downturns present in the industrial capitalist economy, and notable instances of success in historical and contemporary climates, the model has failed to materialise as a mainstream option in organising production. The Cooperative National Law (CNL) aims to seek out the problems concerning cooperatives, including barriers to entry, and regulation, whilst not addressing broader concerns, and has thus constituted a policy failure to some extent.

Model of Robert Owen’s cooperative project

Cooperatives have historically and contemporarily provided viable solutions to traditional investment-ownership models, and provide better performance. The Industrial Revolution forced skilled workers into poverty, to which workers banded together to create cooperatives, allowing the sale of items they could not otherwise afford, a byproduct of the excessive production of industrial capitalism. Robert Owen successfully implemented cooperative firms in the cotton mills of Scotland, but considered the first successful organisation was the consumer-owned Rochdale Society of Equitable Pioneers established in 1844, establishing the ‘Rochdale Principles’, which thus became the basis for the development of the modern cooperative movement, which resurfaced in the 1960s upon the basis of democratic egalitarianism and collective ownership. The most notable success of the model is the Mondragon Corporation in Spain, through job creation, inequality reduction, and improved investment outcomes. Mondragon formalises a level of equality, which supports and empowers ‘community wealth’, and incentivises investments in the creation of cooperatively-owned institutions, like schools, banks, housing and social security systems, which directly benefit and support local communities. Mondragon’s success is grounded in several innovations: community banks, enabling members to provide ‘patient capital’ toward local economic development and generate reciprocal support for community-owned hospitals and schools; retailing systems, integrating producers, employees, customers, partners, and investors, and sharing ownership rewards; ‘community-based, jointly-owned research and education institutions’, supporting startups and existing businesses, and economic development efforts focused on managerial and employee education, and; ‘open business organisation’, decoupling governance and management through broad-based ownership with many stakeholders, development of open independent boards, and ‘social audit councils’. This has produced an ability to withstand economic instability, keeping employment in local communities, improving productivity, and developing community wealth, through higher wages and pensions. In Australia, prior to the 1990s, legislation concerning cooperatives was administered by state and territory governments, but in 1990, the Corporations Act replaced state law. In 1986, the Australian Agricultural Council’s Working Party on Agricultural Co-operatives had recommended the adoption of uniform legislation due to inconsistencies creating barriers to development, as most jurisdictions did not recognise interstate cooperatives or mergers. Thus, in 1996, the Ministerial Council of Corporations supported an intergovernmental agreement to incorporate consistent core legislative provisions. The Commonwealth and state governments, except Western Australia, signed the Co-operatives Laws Agreement, and the 1996 Victorian Co-operatives Act formed the basis for the Agreement, and by 2002, most states adopted core provisions. Some states chose to retain provisions, but the Agreement achieved approximately 95% consistency. In 2007, the Ministerial Council on Consumer Affairs agreed to formally implement nationally uniform legislation, and proposed the CNL, which sought to replace the existing legislation of the 1996 Agreement, upholding its main features, whilst removing the remaining differences, and updating provisions which apply parts of the CA, and removes the additional registration and notification requirements for interstate operation, seeking to address competitive disadvantages for smaller cooperatives, and provide capital fundraising through a new financial instrument, a Co-operative Capital Unit, which may be issued to members and non-members, and potentially traded on stock exchanges. The new Agreement provided that New South Wales be the lead state in enactment, and in 2012, the NSW Co-operatives Act passed in parliament, and thereafter all states gradually adopted the CNL. As of 2017, cooperatives provide a gross annual turnover of more than $113 billion, with combined gross assets under management greater than $722.2 billion, and employment of more than 52,322 people.

Several factors in the success of cooperatives from historical analyses have been identified, and thus provide the means by which successful governance and performance may ensue, yet, as reinforced through media, these factors conflict with neoliberal hegemony, acting as a constraint on cooperative policy. Firstly, capital: resources incur costs, whilst needing profitability. Mondragon’s Caja Laboral Popular and Britain’s Co-Operative Development Agency, ensure capital funding, whereas in Australia, there remains a need for improved and more transparent funding schemes, which, as seen by the successes in the 1977 NSW Program’s creation and funding of cooperative development programs, which has been shown to produce jobs at lower costs, and save the Government in unemployment benefits. Secondly, legislation: laws must be compatible with the cooperative structure, and not disincentivising those who seek out cooperative governance. Italy’s cooperatives are exempt from local taxes, and France’s cooperatives and their worker-members are excused from taxes for their part of the profit, which gets allocated to investment reserves, whilst tax requirements are often more tedious in Australia. Thirdly, education: to maximise contributions, members must have the educational resources necessary. Britain’s cooperatives have been able to draw on resources developed by the Co-Operative College, whereas in Australia, cooperatives are reliant upon limited and underfunded information from state governments. Fourthly, unions: cooperatives thrive with union support, as worker-members and unionists share interests in the maintenance of wage standards, and working conditions. In Wales, where longer hours and lower wages evolved, risks of self-exploitation were recognised and kept under control, by the Welsh Trades Union Congress; however, there has been a broad weakening of unions, and diminished communication between cooperatives and unions. Finally, state support structures: governmental federations have not been able to provide cooperatives with organisational frameworks, preventing opportunities to be taken, and ‘set-backs averted’. Mondragon’s principle of intergroup loyalty and mutual assistance ensures support across cooperatives, and optimises efficiency, whilst in Australia, there remains a need for community-oriented planning, spokespeople for community interests, and for state support structures that make this more feasible. Thus, cooperatives find themselves in a unique position between cooperative principles and the market economy, as reinforced through media. Cooperative principles include voluntary membership, where worker-members must accept responsibilities; management elected by, and accountable to, worker-members; returns on shares are limited to fixed interest rates; surpluses are distributed in proportion to participation; education of members in philosophy and practice; cooperation with other cooperatives; equivocation between workers and members, and; egalitarian decision-making. Most early cooperatives failed due to ‘inadequate capital, inadequate managerial skills and, perhaps an excess of idealism over pragmatism’. The media, as the ‘fourth branch of government’, has three functions in the shaping public perception: agenda-setting, determining which issues are afforded importance; priming, setting expectations according to criteria for evaluating policy, and; framing, influencing preferences, and making sense of new information. In setting the agenda, the media focuses on issue identification, rather than solutions, and thus identifies problems in cooperative experiments and expressions of problems within the capitalist economy, without providing alternative solutions. The media thus acts as a constraint on policy-making, where policy-makers have to construct policy that upholds neoliberal orthodoxy in order for public appreciation in the cultural sphere, and financial support in the material sphere. Previous research has demonstrated that ideological and moral values determine the presentation of news, legitimising dominant perspectives. In reporting on cooperative developments in the United Kingdom, and particularly the outcomes of the Co-Operative Bank, three issues emerged. Firstly, the politicisation of the story through overt and covert political values: ‘frames legitimised values by promoting particular interpretations, goals and solutions’, where invisible frames are hidden in underlying cultural assumptions which marginalise cooperatives, and visible frames influences reporting through lobbying, and ideological political maneuvering, which seek to make alternative structures appear unfeasible, and discredit cooperative principles. Secondly, a tendency for simplification and sensationalism: media attention, of which cooperatives are typically deprived, spontaneously emerges at critical moments, reducing complex issues into simplified, sensationalist terms, and thus reducing the public’s capacity to question underlying assumptions and values, like when the Co-Operative Bank almost collapsed in 2013, and analysis of personalities in governing positions took precedence over that of structural complexities. Thirdly, these political values within this media landscape demonstrate how ‘media practices promote hegemonic perspectives’, the naturalised product of embedded ideological assumptions, and in times of crisis, established frames tend to reassert themselves through media practices. Thus, the media comes to overlook cooperatives as being democratic experiments, and their unique tension in upholding cooperative values within a market economy, in favour of personality-driven critiques of individuals within cooperatives. The only notable reporting on the CNL was an ABC interview with the CEO of the Business Council of Co-operatives and Mutuals (BCCM), who said that the CNL will ‘simplify financial reporting and reduce the cost of doing business’, and thus make ‘co-operatives a more attractive business model’. In the case of the CNL, an absence of reporting demonstrates the need to reframe cooperatives in policy discussions, and the analysis of reporting elsewhere demonstrates the potential for attention upon crisis.

Economic downturn and inequality has made the cooperative model more viable, and the CNL more important, yet the CNL has predominantly failed to accommodate this viability. From 1970 to 1999, socioeconomic challenges led to the demutualisation or dissolution of many cooperatives, amidst the dominance of investor-ownership, changing demographics, and poor management, and despite the modernisation of legislation, culminating in the CNL, the number of active cooperatives has continued to decline, and performance has followed the same trend since its enactment. In 1996, approximately 3,000 cooperatives were active in Australia, whereas by 2017, this had fallen to 1,761. From the 2011/12 financial year to 2015/16, gross assets increased by 10.5%, and assets turnover increased by 6.6%, but earnings before interest and tax decreased by 15.4%, median net profit decreased b 15.1%, median assets decreased by 6.8%, median liabilities increased by 1%, and median equity decreased by 5.6%. The Commonwealth Government (CG) conducted a Senate Inquiry into cooperative policy, and identified several barriers that prevent cooperatives from forming and realising their potential, including a lack of recognition and their contributions to the economy; a lack of information for new and existing cooperatives; concerns regarding the requirements for establishing a new cooperative, and; issues unique to Indigenous cooperative. The Agreement, and the CNL, committed jurisdictions to regulatory uniformity, and whilst most states have adopted the legislation, uniformity has not come to fruition. The CNL aimed to reduce reporting requirements for small cooperatives, but it was found that this is ‘apparently not being felt by organisations at that level’, as the regulatory burden has not been ‘flexible enough to cater for all sizes and types’. The remaining interjurisdictional inconsistencies produce duplicity across regulatory requirements, which is not only an issue in the application of the CNL, but in the policies in relation to registration. cooperatives remain required to register under both state laws and the CA, when operating under multiple jurisdictions, and thus the BCCM proposes that cooperatives should be exempt from this requirement, and if cooperatives offer securities to persons across jurisdictions, it must comply with requirements under both the CA and those of state legislation, exposing the cooperative to double lodgement fees and preparation costs, disadvantaging smaller cooperatives. Thus, the Senate’s recommendations included that ​​the cooperative sector be better represented in policy discussions, and actively promoted as an option for service delivery; the CG works with states to develop programs that encourage sector expansion; the CG works with states to ensure improvement to advice and information in establishment, governance and regulation; the CG works with relevant stakeholders to provide education and training; the CG examines ways in which it may improve the recognition and understanding of the cooperative sector in education; the CG and state governments support formalisations of innovative approaches to raising capital for smaller cooperatives ;the CG examines proposals to amend the CA to provide cooperatives with mechanisms to access a broader range of capital avenues. The failures of the CNL may be broadly construed through three types. Process failure is concerned with the design, decision-making and development stages of policy: the CNL may be deemed a process failure insofar as it fails to account for the problems highlighted by the Senate recommendations, pertaining to advice, capital raising avenues, education, inequity, etc. Programmatic failure refers to the implementation of the policy and whether it achieved its stated goals: the CNL may be deemed a programmatic failure insofar as it is responsible for the declining popularity and performance of the cooperative model as it has failed to bring about uniformity in regulations and standards, with doubly incurred costs remaining a feature of interstate operation, residual barriers to entry, and remaining marginalising in policy discussion. Political failure results where policy damages a government’s electoral prospects: the CNL has had little to no bearing on the political prospects of the parties involved, as reinforced by the media’s absent attention paid to the issue, and no electoral backlash.

Successes, as the result of more cooperative-friendly policy abroad and domestically, historically and contemporarily have formed the precedent by which cooperatives constitute a viable, and improved, alternative to investor-owned business. Through broadening capital-raising, aligning legislation with the needs of the cooperative structure, maximising contributions to local communities and prioritising education, allowing unionisation efforts, and pushing for state support structures, the cooperative model may come to realise its potential. However, as exacerbated by the inadequacies of the CNL, the model remains marginalised, and has failed to meet the provisions of the Agreement which sought to realise this potential through the universalisation of legislation, yet overlooked many vital sources of problems for the cooperative model in the current climate.

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