Co-ops Superior to Corporations

The term “co-op” has gained greater currency than any time since the early 1970s, as the Obama Administration seems to have fallen back on nonprofit health cooperatives as a substitute for the more politically explosive public insurance option. The problem in this case is that the Obama team has failed to outline what exactly these health cooperatives would look like, and how they could compete with the insurance behemoths.

But in general, co-ops are not only morally superior to for-profit corporations, they are also more efficient.

Let’s start by defining co-ops.

“Cooperatives are an autonomous association of persons united voluntarily to meet their common economic, social and cultural needs and aspirations, through a jointly owned and democratically controlled enterprise,” states the International Cooperative Alliance.

“Apart from the investors of capital, there are three main stakeholders in a business: its consumers, the producers who supply inputs to or take the outputs from the business, and its employees,” the International Labor Organization elaborates. “In a cooperative, usually one of these stakeholders is put at the center of the business.”

Even President Obama’s half-hearted scheme has done some good in bringing out the multiple benefits of cooperatives.

Professor Ann Hoyt of the University of Wisconsin cites the success of credit unions in forcing banks to offer better and cheaper services, and says that well-designed health co-ops could serve the same function vis-à-vis for-profit health care companies.

Co-ops are a much bigger part of the economy than many people realize.

“In a study published in March and financed in part by the federal government, Professor Hoyt and other researchers at the University of Wisconsin identified nearly 30,000 cooperatives with revenues of more than $650 billion a year,” report the New York Times. “They include farm co-ops, retail food co-ops, rural telephone and electric co-ops and credit unions—entities as diverse as Ace Hardware, The Associated Press, Blue Diamond Growers (almonds), Carpet One, Land O’Lakes (dairy products), Ocean Spray (cranberries) and Sun-Maid Growers (raisins).”

New York Times columnist Timothy Egan is a big fan of cooperatives, trumpeting their value in his part of the country.

“All over the West, people get their electricity, their hardware, their water from co-ops, and sell their apples, their wheat, their medical services in the same way,” writes Egan. “I can see why Senator Kent Conrad, the Democrat from North Dakota, has been pushing co-ops. They come out of the prairie progressive tradition.”

Now there’s concrete evidence that co-ops are working well throughout the world, and not just in the United States. A recent International Labor Organization report shows how they’ve weathered the global downturn much better than their supposedly efficient for-profit counterparts.

“The financial and ensuing economic crisis has had negative impacts on the majority of enterprises; however, cooperative enterprises around the world are showing resilience to the crisis,” the authors of the report write. “Financial cooperatives remain financially sound; consumer cooperatives are reporting increased turnover; worker cooperatives are seeing growth as people choose the cooperative form of enterprise to respond to new economic realities.”

This isn’t completely surprising if you’ve been following the news. After all, how many co-ops have you heard of asking for government handouts?

Still, it’s nice to have the proof on paper. The ILO authors provide further service by offering reasons for the robustness of cooperatives.

“Cooperatives are uniquely member-owned, member-controlled and exist to provide benefits to members as opposed to profit, and this has an impact on business decisions,” they write. “When the purposes of the business are aligned with those of members who are both investors and consumers of the cooperative, the results are loyalty, commitment, shared knowledge, member participation, underpinned by strong economic incentives.”

In other words, cooperatives are flourishing because they offer the right moral incentives, instead of greed and selfishness—the foundations of the corporate culture that have brought the entire global economy to its knees.